The amount of money you'll need in retirement depends on the type of lifestyle you’re aiming for. Saving into a pension plan could help to cover your costs and get the lifestyle you’re after. We’ve created a retirement tool to help you make sure you give yourself the kind of retirement you’ve always looked forward to. Simply pick the things you want to do in retirement from our list. We’ll help you understand how much money you may need to make these things happen. The figures we use are correct as of April 2024.
This tool is intended to give you a guide. If you think you need more help in your planning you should look for impartial guidance or financial advice.
Retirement tool - your life once you stop work
What kind of life would you like to lead when you’ve said goodbye to your working life? Create a vision of your desired retirement and we’ll give you an idea of how much money you’ll need to fund it. The information below is guided by research from the Pension and Lifetime Savings Association’s PLSA Retirement Living Standards.
To fund the lifestyle you have just chosen, you'll need:
per year before tax
Where does the figure £14,875.50 come from?
The Retirement Living Standards, based on independent research by Loughborough University, have been developed to help people to picture what kind of lifestyle they could have in retirement.
Based on the research, The Retirement Living Standards established what the minimum acceptable standard of living would be - one that includes more than just essentials such as food and somewhere to live. This is around £14,400 a year for a single retired person. We've shown this as £14,857.50 because it's based on the amount you would need to earn before tax is deducted.
What does the £14,400 include?
This assumes that, come retirement, people should be able to holiday in the UK, eat out about once a month and do some affordable leisure activities about twice a week.
What it doesn't include
The Retirement Living Standards do not include rent or mortgage costs. For more information visit the PLSA site
There are some things that aren't seen as necessary for an acceptable lifestyle once you retire. For example, the £14,400 assumes public transport, not a car, and it assumes only an inexpensive meal out once a month, along with one or two cheaper takeaway meals.
How to use these figures
The figure of around £14,400 is for a single person - a retired couple need about £22,400 a year between them (as it's cheaper for two people to live as a couple).
You can find out more about the research on the PLSA site
How do we work out the figures
The final figure we show is higher than the sum of the options you've selected. This is because it's based on the amount you would need to earn, before tax is deducted, to pay for the items you've chosen. We've based our calculations on a single person currently aged 64, retiring after April 2024, paying 20% tax, with a personal allowance of £12,570. The tool does not take Personal Savings Allowance, Dividend tax allowance or Lifetime Allowance into account. The figures will change if your personal circumstances are different (i.e. do not match).
2-week holiday each year
The £14,400 figure for basics assumes a week away in the UK each year. If you want to travel abroad, the PLSA have assumed you'll spend approximately £2,025 on a 14-night half board holiday in Europe, with an extra £1,200 spending money.
3-night city break in the UK
You can add a further 3 nights away in the UK for £369 with spending money of £400
A car + 5-yearly upgrade
A 3-year-old small car will set you back roughly £4,814 in running costs a year, assuming you replace it every 5 years and average 5,000 miles per year.
Gifts & helping others
We've used an annual figure of £3,200 ,guided by a 'moderate' lifestyle from the PLSA. This is spread across birthday, festive and special occasion gifts for others, such as weddings and retirements. This amount also covers helping others via charitable donations and supporting family members, such as grandchildren.
Two activities a week
The £2,080 figure covers two activities a week e.g. gardening, barbecue, social group, bowls, pub, exercise class, gym.
Weekly dinner or drinks with friends
If you like to go out now, that's not likely to change when you stop work. We've assumed roughly £60 once a week for eating out, including alcohol and takeaway, and roughly £100 per month to take others out for a meal i.e., children/grandchildren.
Shopping trips for you
We've put down an additional annual budget of £870 to spend on the latest fashion, on top of what is included in the 'minimum' lifestyle level (£630 per year).
Home improvements
We've allowed an annual spend of £800, which covers materials, labour and money 'just in case' something unexpected happens.
We use this figure as a guide to help you understand the income you might need to fund the lifestyle you want. We came to this amount by using the Retirement Living Standards from the PLSA. It’s based on today's costs for such a lifestyle and doesn’t take future increases in the costs of living into account. We have used the PLSA's minimum standard of living as a starting point and you can add items you choose which come from the moderate and comfortable standards of living too. You can find out more about the living standards on the PLSA website.
Now you have an idea of the amount you may need, use the pension calculator from Moneyhelper to find out how far your pensions will stretch.
Can I boost my pension savings?
You could help boost your pension savings by saving more each month. Even a small increase over time can make a big difference. We understand not everyone will be in a position to save more, but just knowing this is an option could be useful to you. After all, it might be something you could consider doing in the future. You can check with your employer or pension provider what your options for topping up are.
Please contact us to discuss your options.