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What do you need for a comfortable retirement?

What do you need for a comfortable retirement?

Date: 9 February 2024 | By: cosgrove

What do you need for a comfortable retirement?  New calculations suggest that a single persons needs a pension pot of £738,000.

The new calculations are based on the PLSA’s Retirement Living Standards research which has just been updated to account for annual inflation, perceptions of what constitutes varying levels of retirement and the new State Pension. The research reveals how much people will now need in retirement to achieve a minimum, moderate or comfortable retirement lifestyle.

Quilter’s new calculations show that in one year the size of a pot needed for a comfortable retirement has grown by nearly £100,000. Furthermore, a couple now needs close to a million (£929,000) in joint pension wealth for them both to achieve a comfortable retirement.

In January 2023, Quilter calculated using the PLSA’s previous set of figures that a pot of £645,000 was needed for a comfortable retirement. This is partly down to inflation and also related to changes to the composition of the basket of goods used for the index.

So what  do you need for a comfortable retirement? Now, a comfortable retirement requires a single person to have an annual income (gross of tax) of £39,387 per year on top of the state pension, which in 2024-25 is £11,500 per year.

According to the association, a comfortable retirement consists of a range of measures including being able to go for a fortnight in a 4* holiday in the Mediterranean every year and three UK long weekends and up to £1,500 a year on new clothing and footwear a year. Also this year measures such as being able to gift £1,000 a year to support family members has been highlighted in the PLSA research.

For someone looking to achieve what is defined as a moderate retirement lifestyle, a single person will need to build up a pension pot of approximately £459,000 up from £301,000 compared to last year’s calculations. A moderate lifestyle includes being able to afford £74 a week on food (including food away from the home) as well as two weeks in Europe and a long weekend in the UK every year. Gifting £1,000 to family was also highlighted as a necessity among retirees aiming for a moderate retirement.

Finally, for someone looking to achieve a minimum lifestyle which requires someone to have £3,357 in extra income per year on top of the State Pension they need to have built up a pot of around £63,000. A minimum lifestyle enables someone to spend £50 on a weekly food shop, a week long holiday a year and no car.

What do you need for a comfortable retirement? If you are concerned about any of these calculations and your pension pot, please get in touch.

*Calculations assume an escalating income of 3% based on someone who is aged 66 (which is the current age to receive state pension). All pots rounded to the nearest thousand. For the singles an annuity rate of 5.34% was used. For the Joints it was 4.79%.

** Minimum for a couple is covered by the State Pension