Do you know what income you might need for retirement?

A big question when it comes to thinking about your retirement is ‘How much do I need when I retire?’ This might be something you have thought about a lot, or not something you have considered before but either way it’s good to have an idea about what you want to do in your retirement, so you have a better idea of how much you might need to save into your pension.

What are the Retirement Living Standards?

The Retirement Living Standards have been developed by the Pensions and Lifetime Savings Association (PLSA) to help you picture what kind of lifestyle you want to have when you wind down from working – as well as giving you a better idea of what you’ll need to save to support this lifestyle.

These are based on three different standards of living (for a single person).

Minimum lifestyle - 14,400 per annum

This covers your basic needs, with a little left over for fun. This could include:

• A £50 weekly food shop.
• £630 for clothing, footwear and other personal items each year.
• A week holidaying in the UK every year.
• £100 of DIY maintenance a year.
• No car.

Moderate lifestyle - £31,300 per annum

This provides more financial security and flexibility. This could include:

• A £55 weekly food shop.
• £1,500 for clothing, footwear and other personal items each year.
• 2 weeks holidaying at a 3* all inclusive resort in the Med every year.
• Some professional help with home maintenance and decorating each year
• A 3 year old small car replaced every 7 years.

Comfortable lifestyle - £43,100 per annum

This allows for more financial freedom and some luxuries. This could include:

• A £70 weekly food shop.
• £1,500 for clothing, footwear and personal items each year.
• 2 weeks on a 4* holiday in the Med every year, with spending money.
• Replacing a kitchen and bathroom every 10/15 years
• A 3 year old small car replaced every 5 years.

Each of these Retirement Living Standards entails different things and the ideal retirement can mean very different things to different people. For some. A ‘Minimum’ standard of retirement living might seem like more than enough for them. Others might assume they will have a ‘Comfortable’ standard of retirement.

How much will I need each year?

Of course, the Living Standard you are able to enjoy when you retire is based upon how much you are able to save into your pension pot while you are still working. So how much do you need to save to have a Minimum, Moderate, or Comfortable standard of retirement?

For an individual living outside of London, it is estimated that you will need an income of around £14,400 a year to enjoy a Minimum retirement lifestyle, £31,300 for a Moderate retirement Lifestyle and £43,100 for a Comfortable retirement lifestyle.

The full new State Pension is currently around £10,600 a year – so if you were to retire without any additional pension savings or sources of income, your yearly income would fall short of the ‘Minimum’ retirement living standard. However, you can also see that if you have been saving into a pension, the new State Pension goes a long way to helping you reach this level.

For a couple, the amount required to reach each of these standards is a bit different, as sharing the costs of things like bills does reduce the ultimate cost of living per person. As such, for a couple living outside of London, it is estimated that a joint income of around £22,400 per year is needed for a ‘Minimum’ lifestyle, £43,100 for a ‘Moderate’ lifestyle and £59,000 for a ‘Comfortable’ lifestyle. Of course, depending on their circumstances, a couple could have two State Pensions and two individual pension pots to help them meet their retirement goals.

Individuals and couples living in London will need a slightly higher income than the amounts listed here.

How can I check if I'm on track?

So where does this leave you? To help you better understand what standard of living you’ll need to meet your hopes for retirement, and if you are on track to achieve this, why not take our interactive ‘Picture your future’ video quiz? You can then get a more accurate view of what you might need to achieve the retirement lifestyle you are hoping for, as well as whether or not you are currently on track to make it happen.