Financial security and freedom

Back to News & Views

Rising prices add almost 20% to ‘minimum’ cost of retirement

Despite the slow economic recovery, many retirees trying to maintain a basic standard of living have seen the cost of their lifestyle increase by nearly 20% over the past year, according to a new report[1].

The findings were based on research which outlined three different levels of expenditure needed for retirement: Minimum, Modest and Comfortable lifestyles. For those on a Minimum level, the increases in food and energy costs have had the most dramatic effect, with prices rising higher than in other categories.

Expectations for retirement

The Retirement Living Standards, independent research by the Centre for Research in Social Policy at Loughborough University, describe the cost of three different baskets of goods and services, established by what the public considers realistic and relevant expectations for retirement living.

These baskets comprise six categories: household bills, food and drink, transport, holidays and leisure, clothing, and social and cultural participation.

Food and energy

According to the latest figures, the research identified those on a Minimum lifestyle are potentially at greatest risk due to the heightened increases in food and energy costs, which form a higher proportion of their budget than other categories.

The cost of a Minimum lifestyle has increased by 18% for a single person and by 19% for a couple. To make sure retirees can still afford a basic standard of living, it's important that the government continues to follow the State Pension triple lock, which was announced in the last Autumn Statement.

More financial security

This commitment means that the State Pension will rise by 10.1% to £10,600 per year, which should be achievable for a single person if they supplement the State Pension with income from a workplace pension saved through automatic enrolment during their working life.

For those looking for a more comfortable retirement, the Moderate level increased 12% to £23,300 for a single retiree and by 11% to £34,000 for a couple. This level provides more financial security and more flexibility, including a bigger budget for weekly food shopping and occasional eating out.

New State Pension

To achieve this level, a couple sharing costs with each in receipt of the full new State Pension would need to accumulate a retirement pot of £121,000 each, based on an annuity rate of £6,200 per £100,000.

At the Comfortable Retirement Living Standard, retirees can expect to have more luxuries like regular beauty treatments, theatre trips and three weeks’ holiday in Europe a year. A couple could spend £238 per week on food shopping.

Strain on households

At this level, the cost of living increased 11% to £37,300 for one person and 10% to £54,500 for a two-person household. The report highlights that to achieve this level, a couple sharing costs with each in receipt of the full new State Pension would need to accumulate a retirement pot of £328,000 each, based on an annuity rate of £6,200 per £100,000.

The cost of living has been on the rise, placing a greater strain on households in the UK. This year has been particularly difficult for living standards across the board. In particular, domestic fuel costs have risen a staggering 130%, inflicting further strain on incomes for those in retirement.

Moderate and comfortable

The cost of food and fuel has risen significantly over the year, eating up around a third of the budget at minimum income standard levels. This can mean that people struggle to participate in social activities, which is why all budgets include some expenditure on social and cultural participation, accounting for a fifth of the budget at minimum income standard levels and a larger proportion in moderate and comfortable budgets.

At higher incomes, car ownership takes up around 10% of the budget due to an increase in second-hand car prices and petrol/diesel costs.

Own personal requirements

Finally, annuity rates may change, which affects how much money one needs for retirement – £6,200 per £100,000 is illustrative; research will help individuals identify their own personal requirements.

Retirement planning is an essential part of financial planning, as it provides individuals with the ability to prepare for their later years. By having a plan in place, retirees can ensure that they have enough money saved up to support themselves and maintain their standard of living when they no longer have a steady income from work.

Want to take the next step towards your dream retirement?

It’s never too late to start saving for your future and to make sure you don't find yourself facing an uncertain life once you have stopped working. Retirement planning is an essential step towards achieving financial security and freedom in your later years. Planning for retirement now will ensure you don’t have to worry about money in the future.

Source data:

[1] Pensions and Lifetime Savings Association figures quoted are for the UK, excluding London. The pot size calculation assumed an annuity of £6,200 per £100,000 and is illustrative. Annuity rates change frequently and vary according to product type, saver age and other circumstances (e.g. location, health etc.)12/01/23.




Book your FREE, no obligation discussion today. Schedule Appointment

Sign Up to our mailing list - Receive regular news, tips and financial commentary from the Gemini Team.

Latest News

  • Investing can be an intimidating and complex topic, but it doesn't have to be with professional financial advice. Understanding the basic truths of investing will help you make better decisions, regardless of how much money you may or may not have. [...]

  • There's no denying that grandparents have a wealth of knowledge and life experience to offer their grandchildren, but increasingly, they're also able to provide much-needed financial support. With housing prices remaining sky-high, many homeowners are turning to the value in their homes as a way to give their grandchildren a living inheritance. [...]

  • Are you concerned about the impact of Inheritance Tax (IHT) on your estate? It's natural to want to leave behind a legacy for your loved ones, but without the right plan in place, a significant portion of your wealth could be subject to Inheritance Tax. With IHT affecting more and more families, it's crucial to be proactive and plan accordingly. [...]

  • Are you approaching retirement age and have a pension fund that you need to decide what to do with? There are several options available to you, but one option is to buy a lifetime annuity. An annuity is a financial product that converts your pension fund into an annual pension. [...]

  • With house value data now easily available to access online, it’s interesting to see that so many are using this, not just to get an idea of what their own home may be worth, but to get an idea of the sort of amount they may get in terms of parental inheritance in the future. [...]

  • Pensions may not be the most exciting thing to think about, but they are an essential part of planning for your long-term future. In fact, your pension has the potential to be one of your most valuable assets, even more than your property. It's something that could make a significant difference to your lifestyle in later life. [...]

  • Financial planning is a crucial step towards achieving financial freedom and security. By taking the time to thoroughly evaluate your needs and personal goals, you'll be able to make informed decisions about how to best allocate your resources. [...]

  • It is critical to consider the potential consequences of not having a Lasting Power of Attorney (LPA)  in place. Many people assume that their loved ones or close relatives will automatically have the authority to make decisions on their behalf. However, this is not the case, and without a LPA, those close to you will not have the legal authority to handle your financial affairs, health decisions and welfare. [...]

  • Do you often review your finances? Or are you one of those people who just hope for the best? Although managing finances may not be the most exciting activity, keeping track of your financial wellbeing can make a significant difference to your life, both in the present and in the future. Taking control of your finances will enable you to meet your financial goals and improve your overall financial health. [...]

  • Chancellor Jeremy Hunt's first proper Budget 2023, on Wednesday 15 March, brought some welcome but unexpected changes to pension tax. The changes are designed to alleviate the impact of strict pension rules, which are believed by Mr Hunt to have had a negative impact on the country's labour market. [...]

  • April brought a host of changes to the UK's tax regime, with some thresholds for taxes such as additional rate Income Tax being lowered while others, such as Corporation Tax, are increased. [...]

  • The Spring Budget 2023 was delivered by Chancellor of the Exchequer, Jeremy Hunt, on March 15. Among key changes announced were those made to pensions, aimed at making it easier for individuals to save for their retirement and encouraging retirees to return to work. [...]

Gemini Wealth Management Ltd is Authorised and regulated by The Financial Conduct Authority Registered in England & Wales No. 5919877 Registered Office: Gemini House, 71 Park Road, Sutton Coldfield, West Midlands B73 6BT The Financial Conduct Authority does not regulate tax and trust advice, will writing and some forms of buy to let mortgages. The guidance and/or advice contained in this website is subject to regulatory regime and is therefore restricted to those based in the UK.

Website by Mellow Marsh Software
© Gemini Wealth Management Ltd
Privacy Notice | Cookie Policy