More money for eating out, a higher personal grooming budget and the inclusion of a Netflix subscription are among the changes to the Pensions and Lifetime Savings Association’s Retirement Living Standards in the first update of the rules of thumb for retirement spending since they were established two years ago.
Pitched at three different levels – minimum, moderate and comfortable – the Retirement Living Standards are designed to help people picture the lifestyle they want when they retire, and understand the cost.
Developed and maintained independently by the Centre for Research in Social Policy at Loughborough University, they describe the cost of three different baskets of goods and services, established by what the public considers realistic and relevant expectations for retirement living. These baskets comprise household bills, food and drink, transport, holidays and leisure, clothing and social and cultural participation.
Like the Consumer Price Index (CPI) measure of inflation, the Retirement Living Standards are regularly reviewed to ensure they keep up with changes in spending habits as well as changes to prices on the shelves to remain relevant to real world retirement spending.
Just as the most recent updates to the CPI basket of goods included hand sanitiser and home gym equipment, reflecting changes in buying habits brought about by the pandemic, so too the Retirement Living Standards reflect changing attitudes towards retirement lifestyles post Covid-19.
Researchers from Loughborough University held 13 discussion groups with members of the public from across the UK including both retirees and those approaching retirement (55+) to determine changes to the baskets of goods.
Detailed findings are published in the Centre for Research in Social Policy’s report, ‘Retirement living standards in the UK in 2021,’ which will be launched at the PLSA Annual Conference on Tuesday 12 October.
Changes to the Standards
The Minimum Retirement Living Standard is based on the Joseph Rowntree Foundation’s Minimum Income Standard and covers all a retiree’s needs plus enough for some fun – including social and cultural participation. It includes a week’s holiday in the UK, eating out about once a month and some affordable leisure activities about twice a week. It does not include budget to run a car.
The annual budget for the minimum standard has risen since 2019 by £700 to £10,900 for a single person and by £1,000 to £16,700 for a couple in 2021.
Through a combination of the full state pension of £9,339 per year, and auto-enrolment in a workplace pension, this level should be very achievable for most people. About three quarters of single employees are likely to achieve the minimum standard. Everyone who is in a couple, who are able to share costs, can expect to meet the Minimum level simply from having a full state pension entitlement.
Much of the increase has been driven by the rising cost of transport (by road and railway, but not in a private vehicle), which has increased by an average of 10% between 2019 and 2021. The minimum basket also now includes an increase in the budget for hairdressing, from £15 to £25 for women and from £8 to £10 for men, and the inclusion of Netflix, adding around £1.38 each week.
The Moderate Retirement Living Standard, in addition to the minimum lifestyle, provides more financial security and more flexibility. For example, you could have a two-week holiday in Europe and eat out a few times a month.
The annual budget for the moderate standard has risen since 2019 by £600 to £20,800 for a single person and by £1,500 to £30,600 for a couple.