Start planning now to secure your financial future
If you hope to enjoy a comfortable retirement when you cease working, review your pension savings now, as the amount of money you may require could come as a shock. According to the latest data, a single person now needs a staggering £43,900 annually to sustain a comfortable lifestyle in retirement, while couples need £60,600 a year[1]. These figures underscore just how vital it is to have a clear retirement strategy in place.
But what does a “comfortable” retirement mean, and why does it cost so much? By exploring this concept and understanding the associated costs, you can better plan for a financially secure retirement.
Understanding what“comfortable” looks like
A “comfortable” retirement is defined as one that enables financial independence and allows for the enjoyment of a few luxuries. This might mean a Mediterranean holiday each year with sufficient spending money, several weekends away within the UK, and regular meals out. Other indicators include a comprehensive broadband and TV package, clothing budgets, and allowances for dining out and takeaways.
For a single person, these costs total £43,900 annually after tax. To cover this, they would need a pre-tax income of £40,245, in addition to the State Pension, which is £11,973 for the 2025/26 tax year. If you’re relying on a pension pot to provide this income through an annuity, the total savings required ranges from £540,000 to £800,000.
Breaking down the numbers
The figures account for essential expenses and discretionary spending. These projections include weekly averages of £75 for groceries, £42 for dining out, and £21 on takeaways, along with annual costs for holidays and clothing. They aim to reflect realistic living standards rather than extravagant lifestyles. For couples, their combined expenses raise the financial requirement.
Annuity rates used in these calculations vary based on factors such as health, age, and the type of annuity selected. Currently, they range from £5,000 to £7,500 for every £100,000 of savings. While annuities provide a guaranteed income for life, fluctuations in rates and individual circumstances can significantly impact your retirement planning.
Steps to boost your retirement savings
Although these numbers may seem overwhelming, minor adjustments and thoughtful planning can yield significant results.
Here are a few steps you can take to improve your retirement outlook:
Start early: Time is your greatest asset. Regular contributions made earlier in your career allow savings to grow due to compounding interest.
Maximise employer contributions: Take full advantage of workplace pension schemes and match your employer’s contributions whenever possible.
Consider investments: Diversifying your portfolio into stocks and shares ISAs or other investments may provide higher returns than a traditional pension plan, although it carries higher risks.
Delay retirement: Working a few extra years can give your savings longer to grow and reduce the number of retirement years your funds need to cover.
Review your spending: Budget carefully during your working years to prioritise retirement savings.
Seeking professional advice from us will also help you identify the right approach to suit your individual circumstances and goals.
What’s your retirement strategy?
Your retirement should be a time to enjoy financial freedom, pursue your passions, and live the life you’ve always envisioned. However, achieving this requires careful planning and preparation. The sooner you begin taking action, the better your chances of building the secure nest egg you need to turn your dreams into reality.
Early planning provides you with the opportunity to fully capitalise on growth over time and to confidently manage any uncertainties that may arise. Don’t leave your comfort and financial independence in retirement to chance. By starting today, you’re investing in the future you deserve.
Source data:
[1] Data from the Pension and Lifetime Savings Association (PLSA) 04.06.25
https://www.plsa.co.uk/news/article/latest-retirement-living-standards-show-costs-for-minimum-retiree-needs-have-fallen-while-moderate-and-comfortable-standards-see-modest-rises
This article does not constitute tax, legal or financial advice and should not be relied upon as such. Tax treatment depends on the individual circumstances of each client and may be subject to change in the future. For guidance, seek professional advice. The value of your investments can go down as well as up, and you may get back less than you invested. past performance is not a guide to future performance.
