So, you’ve logged into your pension account, checked your balance, and ticked that task off your to-do list. But once you know the number, what comes next? Knowing how much you have is only half the picture; the real question is what kind of lifestyle that money will actually buy you.
This article, from the team at workplace pensions provider TPT Retirement Solutions, explains how, by measuring your savings against the UK’s Retirement Living Standards, you can clearly see how your projected income stacks up against real-world costs and take control of your financial future.
Somewhere on your to do list, you may have a note to check on your pension. It’s a quick task that can often get forgotten in favour of other things – but regularly reviewing your pension arrangements throughout your career can help you make informed decisions about your retirement planning that could improve your lifestyle in later life.
Next time you log in to your online pension account, or read your annual statement, it’s worth having a look at the Retirement Living Standards at the same time. Pensions UK and Loughborough University’s Centre for Research in Social Policy developed them to help savers understand the costs of different lifestyles in retirement. They can then compare the retirement income expectations they’re seeing in their account or statement against indicative lifestyle costs, to see if they match.
The standards help you to understand the costs you might need to cover in retirement by asking you to visualise later life. Do you still want to be going on holidays and, if you do, where to and for how long? Will you still want to get out and about, play sports, and socialise? What will essential bills and costs look like? Once you’ve thought about these questions, you can compare your projected retirement income with the illustrative costs shown in the standards. If there’s a gap, you can review your retirement goals and think about making changes to your savings
approach.
The standards are grouped into three lifestyle levels:
Pensions UK reviews and updates the Retirement Living Standards every year, as the cost of living and our retirement expectations change*.
This year, lower energy prices and changing spending patterns mean the cost of achieving a Minimum retirement lifestyle has fallen slightly. However, the cost of Moderate and Comfortable lifestyles has gone up, in line with rising prices in areas like food, transport, leisure activities and holidays.
The State Pension may form a part of your retirement income, too, alongside workplace or private pensions, so don’t forget to factor these into your review. It could help to cover some of the essential costs within the Minimum standard of living, especially for couples, but if you’re aiming for a Moderate or Comfortable retirement, you’ll probably need additional income. This is where workplace pension savings can make a real difference.
The Retirement Living Standards can’t predict exactly what you’ll spend in retirement, but they do make retirement planning more relatable and help you to plan ahead with confidence.
If your projected retirement income doesn’t stack up against the standards right now, there are things you can do to help get back on track. Many pension providers, including TPT, have online calculators that show how different contribution levels can affect your projected retirement outcome. This is a good first step in establishing what you might need to change to reach the Moderate and Comfortable standards,
and making a plan to achieve it.
* The Retirement Living Standards are illustrative estimates based on research and assumptions about spending patterns. Actual retirement income needs and outcomes will vary between individuals.
