Pensioners need £45,000 a year to be ‘comfortable’ – more than most of us make at work

Every year, Pensions UK – the ‘voice of pension schemes’ – release the amount that retirees need to spend to enjoy a basic, moderate or comfortable retirement – but the figures can be misleading.

This year, the standards – developed by researchers at Loughborough University – have determined that a single person needs to spend £45,400 to enjoy a comfortable retirement.

There are a number of things it deems are needed for people to be comfortable, including having a three-year-old car replaced every five years, up to £1,500 for clothing a year and footwear and £78 for food each week.

However, there are two key points to make about these figures. They don’t include housing costs, and they refer to how much you need to spend – not what you need to receive in income.

And for the minimum and moderate retirement standards, people are expected to survive on much less.

The release of the figures coincides with warnings from retirement experts that the majority of people are not on course to meet the income needed for a comfortable or moderate standard of living in their later years.

It’s hardly surprising given the vast majority of people earn nowhere near enough to enjoy that sort of income in their working lives either, with the latest figures from the Office for National Statistics showing the average annual salary was £39,039.

To have an income of £45,400, an average pensioner would need to be taking around £55,000 from their retirement savings and state pension a year before tax.

For the average worker, it’s far more. As well as income tax, those below state pension age pay national insurance (NI).

And unlike pensioners, they also don’t tend to own their home. The Pensions UK figures exclude housing costs because around 75 per cent of retirees own outright without a mortgage – but working people don’t tend to enjoy that luxury.

The average mortgage payment in the UK is around £19,000 a year, meaning a single person working age person would need to take home around £74,000 to enjoy a comfortable retirement.

So what income do you need to enjoy that sort of take home pay? It’s around £115,000. To earn over £100,000, you need to be in the top 6 per cent of earners.

What the numbers show is how far most people in the UK are from living the sort of lifestyle that we deem as a population to be comfortable.

And when pension firms talk about how people need to put more aside for retirement, they need to remember that most of the people they’re talking to can’t afford that lifestyle during their working careers either.

We need to do all we can to boost people’s retirement savings, and it’s important that government policy nudges people towards that through things like tax relief and auto-enrolment.

But at the same time, we need to direct a lot more political energy to improving the lives of people under retirement age too.