Cost of retirement estimated at £31,700 a year
A single person would need an annual income of £31,700 if they wanted a moderate standard of living in retirement, according to latest data from the Pension and Lifetime Savings Association (PLSA), rising to £43,900 for couples.
A moderate standard of living would see all your essential bills covered, with some left over for financial security. It would also allow for a few perks such as an annual overseas holiday and a long weekend off peak break in the UK, a take-away a week and eating out a couple of times a month.
Calculate how much more income you could get instantly by using our online annuity calculator.
The PLSA’s Retirement Living Standards, which are based on independent research by Loughborough University, aim to help people picture what sort of lifestyle they could have in retirement and the costs involved. Numbers have just been updated for 2025. There are three standards, minimum, moderate and comfortable, and all assume that you own your own home with no mortgage. That means if you’ll still be renting or paying off your mortgage in retirement, you may need significantly more.
The amount needed for a minimum standard of living in retirement has fallen by £1,000 to £13,400 for a one-person household compared to last year, and by £800 to £21,600 for a two-person household. The PLSA said this was mainly due to falling energy costs and some small spending changes made to the living standard by research participants. A minimum standard of living in retirement would cover all your basic needs, and provide a bit left over for things like a holiday in the UK and eating out once a month.
A two-person household who are both getting the full new State Pension (currently worth £11,973 per person, or £23,946 for two people) would be able to meet the costs of the minimum standard from the State Pension alone.
Find out how much equity you may be able to unlock >>
Myron Jobson, personal finance expert at interactive investor, said: "It’s encouraging that the estimated minimum amount needed for retirement has decreased. However, this figure would only support a very basic standard of living. The cost of a more comfortable retirement continues to rise.
“Inflation steadily erodes purchasing power, meaning retirees need more money each year just to maintain their lifestyle. On top of that, life can be unpredictable - unexpected expenses, especially those related to health, can arise and hit harder in some years than others. All of this underscores the importance of taking pension savings seriously. Making regular contributions, starting as early as possible, can make a significant difference in ensuring a more secure and comfortable retirement. The earlier you begin planning and saving, the better prepared you’ll be to enjoy your golden years with peace of mind.”
The cost of a comfortable retirement now stands at a much higher £43,900 for one person or £60,600 for a couple. This would provide enough for holidays abroad, a few extra-long weekends away in the UK, some day trips and a larger spending allowance on eating out and social activities. To achieve this amount in retirement from an annuity, the PLSA suggests that a single person would need a pension pot worth a staggering £540,000-£800,000, or £300,000-£460,000 if part of a couple.
Zoe Alexander, Director of Policy and Advocacy at the Pensions and Lifetime Savings Association, said; “Automatic enrolment sets pension contributions at 8%, which is a solid starting point - especially if you begin early. But for many, saving 12% or more offers a better chance of reaching the retirement they expect.
“Everyone’s situation is different, and contributions should be manageable. But if your circumstances improve, even small increases can make a big difference to your future.”