Expected retirement standards impacted as economic pressures take their toll

Data from financial advice and guidance platform provider, Wealth Wizards, shows that 1 in 3 of individuals previously on track for a ‘Moderate’ retirement lifestyle are now facing a ‘Minimum’ standard, as a result of the economic environment over the past couple of years.

Rising inflation, which has increased the cost of goods and services over the last year, has had a knock-on effect to the expenditure required for retirees to achieve the industry benchmark retirement living standards, as defined by the Pensions and Lifetime Savings Association (PLSA).  

The latest figures from the PLSA show the cost of a minimum standard of retirement has risen 18% since 2021. According to the PLSA, the amount a single person now needs to spend to achieve Retirement Living standards are:

·      Minimum: £12,800 a year. An 18% increase from £10,900

·      Moderate: £23,300 a year. A 12% increase from £20,800

·      Comfortable: £37,300 a year. An 11% increase from £33,600

Analysis of anonymised data of over 40,000 users of the Wealth Wizards Pension Guidance Software as a Service (SaaS) Platform, gathered over the last two years¹, demonstrates the impact the recent inflationary pressures and cost of living crisis has had on people planning for retirement:

·      nearly 1 in 5 pension holders are not on track for the retirement living standard they would like

·      nearly 1 in 3 of those previously on track for a ‘Moderate’ retirement lifestyle are now facing a ‘Minimum’ standard of living 

·      1 in 10 of those previously on track for a ‘Minimum’ living standard are now currently below that, meaning, if they do not address the issue, their basic needs in retirement would not be met

Commenting on the findings, Ben Hampton, CEO of  Wealth Wizards, said: “Our insight demonstrates millions of people are facing a real risk of sleepwalking into a retirement that doesn’t meet their desired lifestyle. While some people have access to a financial adviser to help address the issue, there are millions of others who don’t because of the associated costs or, unwittingly, they feel their circumstances don’t warrant it. These are exactly the people who would benefit from increased access to advice and more personalised guidance and, rightly, the regulatory focus on helping customers at this key life stage is intensifying. 

“The thematic review of retirement income advice is only adding further interest to how customers are supported, and the long-awaited review of the advice/guidance boundary is expected to bring new innovative guidance and advice models. However, the immediate impact of the current economic climate is evident and time is of the essence. As an industry, we must find ways to move forward in offering solutions now for those who don’t have time to wait.”