Retirement Living Standards provide a 'valuable and timely reminder of the gap between aspiration and current savings levels'

Pensions UK have published their updated Retirement Living Standards (RLS) and they underline that many people are not saving enough.

The RLS are there to help people picture what lifestyle they expect in retirement and the costs associated with three different levels.

The annual standards, calculated by the Centre for Research in Social Policy, Loughborough University, now show that a Minimum retirement lifestyle costs £13,900 a year for a one-person household and £22,500 for two people. A Moderate lifestyle costs £32,700 for one person and £45,400 for two, while a Comfortable lifestyle costs £45,400 and £62,700 respectively.

The figures reflect increased everyday costs across spending categories such as food, essential household bills and transport, as well as the social activities and hobbies.

We expect around 82% of the working population to reach the Minimum standard of living in retirement. However, this falls to just 23% reaching a Moderate standard and 9% reaching Comfortable.

This is out of step with what some people expect for their retirement. Without higher levels of saving, there is a risk that many will face a significant drop in income when they stop working. 

The Pensions Commission

The Pensions Commission is actively considering whether minimum rates of saving within automatic enrolment schemes need to rise in the future.

In the meantime, the RLS can help people take control themselves, by thinking about the retirement they expect and putting more money away, as well as asking their employer what more they can contribute above the minimum.

Many employers contribute well above legal minimums on their own initiative, but Pensions UK wants to see more action by employers to help fix the retirement savings gap – by making sure they are keeping people enrolled and where possible offering matching contributions above minimum levels.

Housing costs and individualisation 

Housing costs are not included within the Retirement Living Standards, as they vary significantly depending on location and personal circumstances. Some people will enter retirement mortgage‑free, while others may continue to rent, finish paying their mortgage or have major life changes in later life. 

This means it is important for individuals to use the Standards as a guide and adjust them to reflect their own situation, particularly where additional housing costs are likely to be a key factor.

Zoe Alexander, Executive Director of Policy and Advocacy at Pensions UK, said: “The latest update to the Retirement Living Standards underlines a clear reality for many people, today’s saving levels will not be enough for the retirement they expect. It is expected that around 82% of people reaching a Minimum standard of living, but far fewer will go beyond that.

“That is out of step with what people expect for their future. Without action, too many risk facing a cliff-edge drop in income when they stop work. The Government is right to be considering whether minimum contributions need to rise through the work of the Pensions Commission.

“In the meantime, tools like the RLS play a crucial role by helping people take control and understand what they might need, so they can put more money away where and when they can. 

“We also encourage people to speak to their employer and see whether the organisation is prepared to support them to save above the minimum, such as higher rates of matching pension contributions. This could help ‘bridge the gap’ until policy catches up and we see higher savings levels set in legislation.”

Lydia Fearn, Partner in LCP's DC team and Co-Head of Consolidation, commented: "The updated Retirement Living Standards provide a valuable and timely reminder of the gap between the retirement many people aspire to and what current savings levels are likely to deliver.

"By translating retirement income into real-world lifestyles, the Standards help individuals, employers and policymakers better understand the challenge ahead. As the Pensions Commission considers the future of automatic enrolment, these findings reinforce the need for collective action across government, employers and the industry to improve retirement adequacy and help more people achieve the outcomes they expect in later life.