Recent headlines suggest that only 9% of people will enjoy a comfortable retirement, but the reality is more nuanced. The latest Retirement Living Standards report from Pensions UK highlights the different levels of retirement living and shows that while reaching the comfortable tier is challenging, many people are on track to achieve at least a minimum standard of living. Here’s what the numbers really mean and what to consider when planning for your retirement.
As meteorological summer started with heavy rain, a further dampener was put on proceedings by a storm of media headlines thundering that only 9% of people could look forward to a ‘comfortable’ retirement. As is often the case with shock-horror statistics, the reality is rather more nuanced.
The gloomy coverage was prompted by a Retirement Living Standards (RLS) report from Pensions UK, a trade group for the retirement savings industry. The RLS report, which has been published each year since 2021, is an attempt to show the costs of retirement (excluding housing costs) for single-person and two-person households based on three different standards of living:
- Minimum: defined as “Covers all your needs, with some left over for fun”,
- Moderate: defined as “More financial security and flexibility”, and
- Comfortable: defined as “More financial freedom and some luxuries”.
The headlines related to the top-tier category. An alternative banner of ‘Over four in five on target to reach a Minimum standard of living in retirement’ would have been equally accurate, but less attention-grabbing. The reason for the large gap between the Minimum and Comfortable groups becomes obvious when you examine the yearly costs assessed by Pensions UK, in conjunction with Loughborough University:
| Living Standard | One-person | Two-person | ||
| UK
£ |
London
£ |
UK
£ |
London
£ |
|
| Minimum | 13,900 | 14,600 | 22,500 | 24,100 |
| Moderate | 32,700 | 34,000 | 45,400 | 47,000 |
| Comfortable | 45,400 | 47,200 | 62,700 | 64,800 |
Source: Pensions UK
These amounts exclude housing costs, meaning that if you rent or still have a mortgage to pay in retirement, you would need more.
Pensions UK calculates that for a single person living outside London to achieve the Comfortable level requires a pre-tax income of £54,720 – more than enough to make them a higher-rate taxpayer anywhere in the UK. For a two-person household, Pensions UK puts the gross income needed as £36,045 each (£72,090 in total).
The State pension in 2026/27 is £12,548 a year, so reaching the Comfortable tier requires a significant amount of private pension and/or investment income. But before you think you can make do with the Minimum, remember that summer rain and the fact that the bottom-rung retirement level assumes only a single week’s UK holiday.
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The value of the investment and the income from it can fall as well as rise and investors may not get back what they originally invested, even taking into account the tax benefits.
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