Brits have been warned they could need almost £30,000 more a year to enjoy a comfortable retirement, as inflation is set to push the cost of living significantly higher for future pensioners.
Experts at Unbiased said savers could need an extra £28,993 a year on top of today's estimates, according to the latest Retirement Living Standards from the Pensions and Lifetime Savings Association (PLSA).
Current retirement costs
A single person currently needs £45,400 a year after tax for a comfortable retirement, covering lifestyle extras such as regular holidays and dining out. Couples aiming for the same standard require £62,700 a year.
For a more modest lifestyle, a moderate retirement costs £32,700 a year for an individual, while a minimum standard costs £13,900.
Impact of inflation by 2046
If inflation averages 2.5% over the next two decades, people currently in their 30s and 40s will see these targets rise sharply. By 2046, a single person will need £74,393 a year for comfort — an increase of £28,993. Couples will face a £40,041 inflation penalty, pushing their required joint income to £102,741 a year.
A moderate retirement for an individual will require an extra £20,883, rising to £53,583, while even a minimum lifestyle will cost £8,877 more, at £22,777 a year.
Millions not saving into a pension
The latest Pensions Commission report found that 45% of working-age adults — around 18 million people — are not saving into a pension at all, leaving a large portion of the UK workforce unprepared for the cost of living after work.
Tim Grimsditch, managing director of Unbiased, explained: "People look at a 2% or 3% inflation rate and assume it sounds manageable. What they often miss is the cumulative impact this has over the course of a career. It steadily erodes purchasing power, meaning the retirement target you are aiming for today will look very different by the time you stop working.
"Trying to fund your future based purely on current figures is an easy trap to fall into. Because the true cost of retirement is a moving target, relying on guesswork puts your lifestyle at risk."
"If you are unsure about how these shifting goalposts will affect your plans, you can use our pension guide to better understand your options, maximise tax relief, and keep your retirement savings on track."
"Taking professional financial advice early on is a practical way to build an adaptable plan that protects your lifestyle, helping to ensure you can achieve the standard of living you expect in retirement."
