PLSA raises required retirement income figures

The Pensions and Lifetime Savings Association (PLSA) has increased its retirement living standard for a moderate standard of living for a single person by £8,000, from £23,300 to £31,300 over the past year¹. The analysis attributes the rise to the rising cost of living and an expectation of providing further financial help to family members¹. For a comfortable standard of living, the figure now stands at £43,100 per year¹.

The figures sit alongside new research from the Equity Release Council (ERC), based on a survey of 5,000 people, which found that 46% of people do not feel confident about their future finances, up from 35% in 2021¹. Among UK adults, 57% said their financial situation had got worse over the past year, while 14% felt their finances had improved¹.

Confidence has fallen most sharply among older age groups. Among those aged 55 to 64, the proportion lacking confidence rose from 37% to 51%, and among retirees aged 65 to 74 it rose from 18% in 2021 to 39%¹. Pre-retirees aged 45 to 54 were the least confident group, with 55% reporting they were not confident about the future¹. More than one in three homeowners (37%) said they had struggled to build up enough pension savings to be confident about their living standards in retirement¹.

Jim Boyd, chief executive officer at the Equity Release Council, said:

The PLSA figures are the association's estimates of the income needed for given living standards, not a measure of what households actually receive. The ERC survey findings are self-reported confidence levels rather than a measure of actual retirement income. The two sets of figures come from separate bodies and measure different things; the sources do not present them as directly comparable.

Why it matters for households

The PLSA's moderate standard for a single person is now £31,300 a year, £8,000 higher than a year earlier, and its comfortable standard is £43,100¹. Anyone using these benchmarks to judge whether their pension savings will cover retirement is working against a higher target than a year ago. The PLSA attributes part of the increase to an expectation that retirees will provide financial help to family members, so the required income reflects spending that may not be the retiree's own¹.

The confidence figures cover people still working as well as those already retired. For those already drawing a pension, that is a change in how people feel about money they are already living on rather than a change in the income itself.

The ERC research also found that 37% of homeowners said they had struggled to build up enough pension savings to be confident about their living standards in retirement¹. Equity release, which the ERC represents providers of, is one route some households consider where property wealth is available; the source sets out that borrowers must be at least 55, that the maximum that can be borrowed is around 60%, and that interest on a lifetime mortgage rolls up where no monthly repayments are made¹. It also notes that equity release can affect means-tested benefits such as Pension Credit and reduced council tax, and that repaying a loan early often triggers an early repayment charge¹. Our guide to how much you need to retire covers the income benchmarks in more detail.

What happens next

No further dated steps are set out in the source. The PLSA retirement living standards and the ERC survey figures are published as at 16 February 2024¹.