The price to retire is increasing – here’s how you can keep up

The average pension pot needed to fund a ‘basic’ retirement has increased by nearly a whopping 60% in the last three years, according to research from the Resolution Foundation*. By and large, this has been driven by a sharp increase in the cost of necessities – think the likes of food, energy and travel.

The new figure is estimated to be £107,800 for 2023/24, up from £68,300 in 2021/22. It provides an income of £19,300 a year. This has been averaged out across differences in relationship status, gender, housing and life expectancy. So it’s worth noting that you might need more or less depending on your personal circumstances. For example, whether you own your home or not.

Fall short, and you may have to make compromises when it comes to your retirement spending, or work for longer than you’d like. Bear in mind that ‘basic’ just covers everyday needs and not much else. So if you want the freedom to treat yourself, or to be a bit more spontaneous with your money, you’re likely to need even more.

This news comes amid findings from the Living Wage Foundation** which shows that 53% of UK adults surveyed feel they’ll never be able to retire. But it doesn’t have to be this way.

Your future’s in your hands

When it comes to your pension, paying it a little more attention today can make big a difference down the line – something your future self will be thankful for. And the sooner you start, the better. So what actions can you take now that will help improve your chances of building a healthy pension pot come retirement? Here are four ways to do so:

• Review how much you’re currently contributing. If you choose to pay in more, some employers will match you up to a certain limit, which is essentially free money. It's well worth asking your employer for more details.
  
  
• Check in on your investments. How your pension’s invested can play a key role in determining its value many years from now. Think about the level of risk you’re comfortable taking and the implications this has on your money’s chance to grow.
  
  
• Consider sacrificing any bonuses you receive. Bonuses are usually taxed like your regular salary, but if your employer pays it directly into your pension instead, it’s usually tax free – allowing you to save more of it.
  
  
• Consider paying in a lump sum – this is a quick and easy way to give an instant boost. For example, you may have come into some inheritance.

Level up your money with financial advice

Although it’s important to have one eye on the future, you still need to enjoy the here and now – life’s for living, after all. So when it comes to getting the balance right, what’s the winning formula? Financial advice can recommend a plan of action that helps you juggle things effectively, ensuring your pension and wider finances are working as hard as they can be.  

Pensions can be hard to wrap your head around at the best of times, but expert advice can make things a lot more straightforward. This includes recommending how the actions we've outlined above apply to you specifically. Having a tailored plan in place can be the first step on your journey to achieving the retirement you deserve.

Speak to one of our financial advisers today by booking your appointment here.

* M Broome, Calculating a Living Pension: the 2024 update, Resolution Foundation, September 2024

** Retirement Realities: Understanding the impact of cost-of-living on pension savings and retirement expectations, Living Wage Foundation, September 2024