Retirement is something we should all be able to look forward to. One of life’s great milestones, it gives us the opportunity to pursue the things we love freely, without the time pressures of a job. But how much do you need to save to enjoy this chapter of life without financial worry? The answer depends on the lifestyle you envision.
Whether your dream retirement involves relaxing at home, jet-setting around the globe, or something in between, The Pensions and Lifetime Savings Association have crunched the numbers and broken retirement living standards down into three tiers – minimum, moderate, and comfortable.
In this article we will explore each scenario and highlight the essential information you need to start planning ahead.
How much does a single person need to retire in the UK?
Planning for retirement as a single individual requires a clear understanding of your financial needs and lifestyle aspirations. You’ll need to support your own future using the cash and assets you have accrued throughout your working life.
Minimum retirement – the basic comforts
To cover essential living costs with the occasional treat, such as dining out with friends or a short weekend getaway, you would need around £14,400 per year. This level of income ensures your basic needs are met—housing, food, utilities, and modest discretionary spending. While it’s not extravagant, it provides a stable foundation for day-to-day life.
How much to save?
With current annuity rates and state pensions in mind, you’d need approximately £215,000 in private savings and pensions to achieve this level of income. This calculation assumes you’re supplementing your state pension and using your private savings to close the gap.
Moderate retirement – a mid-range lifestyle
Want more freedom for hobbies, leisure activities, and holidays? A moderate lifestyle for a single person costs around £31,300 per year. This allows for regular trips, membership fees for clubs or activities, and an upgraded standard of living, including higher-quality food and more frequent dining out.
How much to save?
To sustain this lifestyle, you’d need around £450,000 saved, assuming a combination of pension drawdown and investment returns. It’s worth noting that achieving this level requires disciplined saving and investment strategies throughout your working life, but it opens the door to a more fulfilling and enriched retirement.
Comfortable retirement – luxury living
If you dream of extensive travel, high-end dining, and indulging in big-ticket purchases, you’ll need about £43,100 per year. A luxury retirement offers financial freedom to explore the world, upgrade your home or car, and enjoy premium experiences without financial stress.
How much to save?
A luxury lifestyle would require roughly £700,000 in savings and pension pots to provide this level of income. This amount assumes strategic investments to generate returns and careful planning to preserve wealth over the years. It’s the pinnacle of retirement planning, offering peace of mind and the flexibility to live on your terms.
Learn more about how Flying Colours can help you grow and protect your wealth.
How much does a couple need to retire in the UK?
Retirement planning as a couple comes with unique benefits—shared expenses and combined income sources can make achieving your goals much more manageable.
Minimum retirement – the basic comforts
A couple looking to cover essentials with occasional extras would need around £22,400 per year. By sharing costs such as housing and utilities, this option provides a stable yet modest lifestyle for both of you.
How much to save?
To support this, couples should aim for a combined retirement savings of around £335,000, supplemented by their state pensions. This provides enough to cover the essentials while allowing for some discretionary spending.
Moderate retirement – a mid-range lifestyle
Couples wanting a more active retirement, with regular holidays, enhanced leisure options, and upgraded living standards, would need approximately £43,100 per year.
How much to save?
Achieving this level requires combined savings and pensions of about £650,000. With careful financial planning and investment strategies, this amount is achievable and will support a more enriched and fulfilling lifestyle.
Comfortable retirement – luxury living
For couples aspiring to a financially independent retirement with ample travel, high-end experiences, and significant lifestyle upgrades, a yearly income of around £59,000 is recommended.
How much to save?
To maintain this level of comfort and freedom, couples should target a combined savings pot of approximately £1 million. This ensures the financial flexibility to enjoy premium experiences and make substantial lifestyle choices without compromising on your long-term security.
Learn more about how Flying Colours can help you financially protect your loved ones.
How to increase your retirement income
Now that you know the amount you need to live the lifestyle you want, the next step is to create a plan that utilities a combination of strategies to maximise your pension pot and contributions.
There are numerous ways to achieve this, and the options that work best for you will be specific to your situation. However, below we will outline the three most important steps that will apply to most people.
1. Maximise Workplace Pension Contributions
Saving more may seem obvious, but many individuals leave their contributions on autopilot. Actively increasing your contributions to workplace pensions will significantly boost your retirement savings because your contributions benefit from tax relief, effectively amplifying your savings.
For instance, contributing £80 results in a £100 addition to your pension due to basic rate tax relief. Higher-rate taxpayers can claim additional relief through their tax return.
Better still, employers are obliged to pay a minimum contribution of 3% of your salary into your workplace pension, further boosting your workplace pension pot.
2. Starting a personal pension
A personal pension is a powerful and flexible tool for building retirement savings. It offers tax advantages, with contributions boosted by tax relief, and enables investment growth in a range of assets like stocks, bonds, and property.
With flexible contribution options and the ability to tailor investments to your goals, personal pensions can grow significantly over time. For instance, saving £200 monthly from age 25 could amount to over £190,000 by age 65, assuming a 5% annual return. Starting early and consistently contributing allows you to create a solid financial foundation for the retirement lifestyle you envision.
3. Seek expert advice
Seeking guidance from an independent financial adviser like Flying Colours can help simplify the complexities of retirement planning and ensure your strategy is tailored specifically to your situation and available options.
In addition, independent advisers can provide expert guidance across a wide range of areas, including tax-efficient savings, personalised investment strategies, and long-term monitoring to help keep your plan on track. Learn more about planning for retirement.
Am I retirement ready?
If you want to learn more about what your retirement will look like, the team here at Flying Colours have created an online retirement planning quiz to kick-start the process.
Take the 2 minute online quiz today.
Sources:
https://www.standardlife.co.uk/about/press-releases/plsa-cost-of-being-single-in-retirement
https://www.sjp.co.uk/individuals/news/whats-the-cost-of-a-comfortable-retirement
https://moneyage.co.uk/comfortable-retirement-requires-over-700k-in-new-calculations.php
