The cost of retirement is going up too

We’re used to hearing about the “cost of living crisis”, almost every day. It follows that the cost of retirement is also going up, and updated research from the Pension and Lifetime Savings Association (PLSA) provides an insight into how retirees are affected.

People thinking of retiring in the future also need to consider how they will gather the extra resources needed to provide for them when they stop work.

In the latest update of the PSLA’s Retirement Living Standards, there has been a big increase for those who are expecting to have the lowest amount to spend when they stop work, as a higher proportion of their budget goes towards the things that have risen the most in price: with food having the biggest impact.

Based on independent research by the Centre for Research in Social Policy at Loughborough University, the Retirement Living Standards 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.

The three baskets are described as:

  • Minimum. This is the same as the Joseph Rowntree Foundation’s Minimum Income Standard (MIS) and reflects what members of the public think is required to cover a retiree’s needs, not just to survive but to live with dignity. It includes £96 for a couple’s weekly food shop, 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 budget to run a car.
  • Moderate. In addition to the minimum lifestyle, this provides more financial security and more flexibility. For example, a couple could spend £127 on the weekly food shop, have a two-week holiday in Europe and eat out a few times a month.
  • Comfortable. 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.

Different annual costs are then calculated for each group, as follows:

Type of HouseholdMinimumModerateComfortable
Single£14,400£31,300£43,100
Couple£22,400£43,100£59,000

The cost of a Minimum lifestyle increased by 12.5% for a single person and 11% for a couple. The higher cost of food was a bigger contributor. However, the moderate basket has had the biggest overall increase in costs – 34% for a single person, and 26% for a couple. This has been affected, however, by changes in expectations of what a moderate basket should include. The budget for a moderate basket now includes a budget to help family members (e.g. helping with grandchildren’s activities) as well as a budget to take family members out for a meal. However, the increased cost of living still had an impact on this group.

The Retirement Living Standards are to be welcomed. They give those who haven’t retired a clear indication of what their spending needs might be when they stop work. However, they are only a very general guide and they continue to work on the basis that retirement is one homogenous phase of your life. In our experience, there are three clear parts of retirement – “Go:Go”, “Slow Go” and “No Go” and spending is different in all three stages. Some people prefer to “overspend” in the early years, whilst others will hold back funds for later life, perhaps being overcautious – everyone is different! We also know that the cost of living varies in different parts of the country, and that our part of the world is one of the more expensive places to retire (but we do have more sun in Sussex than elsewhere, so it’s worth it!).

Our view is that your retirement spending is a personal matter, and you should have a personal plan for retirement, rather than relying on general figures. The best approach is to work with us to figure out how much you will spend when you stop work and to put together a personal plan to make this happen.

You can view the research from Pension and Lifetime Savings Association here.

Philip Wise | philip@sussexretirement.co.uk

Managing Director and Chartered Financial Planner


This guide is for information purposes and does not constitute financial advice, which should be based on your individual circumstances.

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