Cost of comfortable retirement has already gone up by £2,200: Couples will need to find extra cash to sustain post-working lifestyle after Covid pandemic, research shows
Couples will now need to find an extra £2,200 a year to keep up a comfortable retirement lifestyle after the pandemic, after the pension industry's guidelines for spending expectations were revised in the wake of Covid.
It means couples will need another £54,400 and total pension savings of nearly a quarter of a million pounds to enjoy a retirement of £8 bottles of wine, two annual holidays to Europe, and a restaurant budget of £500 a month.
The research also revealed how spending priorities had changed, with retirees now wanting to splash more cash on dining out and haircuts, and insisting on a subscription to Netflix.
It comes as Britain faces a cost of living crisis while energy bills soar ahead of winter. The Bank of England expects inflation to soar above 4 per cent by the end of the year and supermarkets have warned of 5 per cent price rises.
The Pension and Lifetime Savings Association's 'retirement living standards' published today are designed to give savers a picture of how much money they will need to keep enjoying their spending habits and favourite brands.
The PLSA's retirement living standards are pitched at three different levels - minimum, moderate and comfortable.
SINGLE: The annual budget for the minimum standard has risen since 2019 by £700 to £10,900 for a single person
COUPLES: The annual budget for the minimum standard has risen since 2019 by £1,000 to £16,700 for a couple in 2021
The study, developed and maintained independently by the Centre for Research in Social Policy at Loughborough University, details everything from the brand of beer they might like to buy, to their summer holiday destination.
The retirement living standards are pitched at three different levels - minimum, moderate and comfortable.
Researchers held 13 discussion groups with people from across the UK, including both retirees and over-55s approaching retirement.
The minimum retirement living standard covers a typical retiree's basic needs plus enough for some fun.
It includes a week's holiday in the UK, eating out about once a month and some affordable leisure activities about twice a week.
It does not include a budget to run a car.
The annual budget for the minimum standard has risen since 2019 by £700 to £10,900 for a single person and by £1,000 to £16,700 for a couple in 2021.
Through a combination of the full state pension of £9,339 per year, and auto-enrolment in a workplace pension, this level should be very achievable for most people, the PLSA said.
The minimum basket includes an increase in the budget for hairdressing, from £15 to £25 for women and from £8 to £10 for men, as well as the inclusion of Netflix.
The moderate retirement living standard provides more financial security and flexibility.
For example, someone could have a two-week holiday in Europe and eat out a few times a month.
The annual budget for the moderate standard has risen since 2019 by £600 to £20,800 for a single person and by £1,500 to £30,600 for a couple.
The eating out budget, which rose from £75 per person per month to £100 per person per month, drove much of the increase.
The budget for social activities was increased from £35 to £50 per week, with Netflix also added alongside price inflation across leisure services and leisure goods.
The PLSA said around half of single employees are on track to expect a lifestyle between minimum and moderate - and couples who are able to share costs will be higher in this range.
At the comfortable retirement living standard, retirees can expect to enjoy some luxuries such as regular beauty treatments and theatre trips.
The annual budget needed for a comfortable retirement living standard has increased since 2019 by £600 to £33,600 for one person and £2,200 to £49,700 for a couple.
About one in six single employees are projected to have an income between moderate and comfortable.
The cost of annual maintenance and servicing of a burglar alarm was included in the comfortable standard for the first time.
Pensioners and savers told researchers the pandemic had made them rethink retirement.
One man from Wales said he had not realised how important dining out was for 'emotional wellbeing'.
Another said his partner's quality of life would not be the same without Netflix, adding: 'These things were a luxury, but they become a necessity in certain circumstances.'
The pension industry's guidelines for spending expectations have been revised. Chancellor Rishi Sunak is pictured last week
Of the coronavirus lockdowns, the report said: 'This period of enforced abstinence serves to underline just how important it is to be able to participate in the world around, not through extravagant choices but in more every day and routine ways – seeing family and friends, going out for something to eat, taking an annual holiday, planning and looking forward to future social events.'
But while the cost of living is rising, the report authors said the financial strain of the pandemic could mean many now cut down on pension saving.
They wrote: 'The reduced ability to save for the future is a real concern, particularly in light of existing fears that people are simply not saving enough for the kind of lifestyle they imagine for themselves in retirement.'
Nigel Peaple, director of policy and advocacy at the PLSA, said: 'It is important that the retirement living standards remain relevant by reflecting real-world price changes and real-world expectations about lifestyles in retirement.
'We hope the updated standards will encourage people to think about whether they are saving enough for the retirement lifestyle they want and, in particular, whether they are making the most of the employer contributions on offer in their workplace pension.
'The lockdowns caused by the pandemic have given many workers a foretaste of being retired and made people think about the activities and experiences they truly value. T
'he pandemic has emphasised the importance of economic security as well as social and cultural participation in retirement.
'With barbers and hairdressers closed during lockdowns and many of us taking scissors to our own hair for the first time, it is little surprise that the research groups agreed the budget for personal grooming should be increased across the three standards.
'The addition of Netflix also gives an insight into what many of us expect to be doing when we finish work.'
Tom Selby, head of retirement policy at investment broker AJ Bell, added: 'If having a moderate or comfortable standard of living in retirement is a key goal, you might need to think about saving a bit more in your pension if you can afford to.'
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