PLSA reveals decline in minimum RLS; moderate and comfortable RLS rise

The Pensions and Lifetime Savings Association (PLSA) has released its latest Retirement Living Standards (RLS), revealing that the cost of the minimum retirement lifestyle has decreased, while the costs associated with moderate and comfortable lifestyles have increased.

The PLSA credited the decrease in the minimum standards to the impact of lower energy prices and changes in the public’s expectations for this standard, while the rise in moderate and comfortable standards was influenced by inflation in various spending areas, but this was balanced out by the drop in energy costs.

Calculated by the Centre for Research in Social Policy at Loughborough University on behalf of the PLSA, the RLS describes the cost of three different retirement lifestyles: Minimum, moderate, and comfortable.

Its latest update showed the cost of a minimum RLS has decreased by £1,000 per year to £13,400 for one-person households, while for two-person households, it is £21,600.

Meanwhile, the moderate RLS has risen from £31,300 to £31,700 for one-person households, while for two-person households it has increased from £43,100 to £43,900.

The comfortable RLS has also risen from £43,100 to £43,900 for one-person households and from £59,000 to £60,600 for two-person households.

Changes in fuel prices played a key role in this, as the PLSA reported that weekly domestic fuel budgets have dropped by over 25 per cent across all RLS since the 2023/24 update.

At the minimum level, fuel costs fell by £12.44 for two-person households and £8.82 for one-person households. At the moderate and comfortable levels, costs declined by £16.74 and £15.38 per week, respectively.

The PLSA also emphasised the "vital" role of the state pension, particularly for those at the minimum level.

For two-person households, the state pension alone is expected to cover annual living costs, while for one-person households would need an additional £20,000 to £35,000 per year on top of the state pension to meet predicted expenses.

Recent research also showed that participants agreed that the budget for rail travel would need to rise, reflecting higher rail fares and a need to travel further by rail, with annual rail fare budgets rising from £100 to £180 per person.

In addition to the change to the amounts needed for each cohort of the RLS, this year’s update also saw a change in how living arrangements are described, with the terms “one-person” and “two-person” households replacing “single” and “couple”.

This update was done to recognise that whilst the majority of savers expect to live with someone else in their retirement, this may not always be a romantic partner.

Recent research from the PLSA found that most people already live with others, with 75 per cent indicating that they live with a member of their family, such as spouse, children, parents, or other relatives.

Meanwhile, 22 per cent said they live alone and 3 per cent said they live with someone other than a family member.

However, when looking ahead to retirement, more than three quarters (77 per cent) of non-retired people expect to live with someone else in retirement, while 23 per cent expect to live alone.

The research also suggested a widespread openness to shared living, as when asked who they would be willing to live with in retirement to help share costs like housing and bills, only 12 per cent of people said “nobody” and wanted to live alone.

Commenting on the update, PLSA director of policy and advocacy, Zoe Alexander, said: "Retirement isn’t a one-size-fits-all experience. The standards recognise that retirees can share costs, often with a partner, and that can make a huge difference to affordability in later life."

Adding to this, the Centre for Research in Social Policy at Loughborough University co-director, Matt Padley, said: “The consequences of the cost-of-living challenges over the past few years are still being felt, and we’ve seen some subtle changes in public consensus about minimum living standards in retirement, resulting in a small fall in the expenditure needed to reach this standard."

St. James’s Place group advice director, Alexandra Loydon, said that the RLS should serve as a "wakeup call" for savers across the country to start thinking seriously about their pension and building up their retirement pot.

Loydon said it is "worrying" that many people are underestimating their retirement needs and despite the amount someone needs to secure a minimum standard of living in retirement falling, emphasising the importance of understanding that this only covers basic needs.

AJ Bell director of public policy, Tom Selby, welcomed the easing of inflationary pressure reflected in the reduced minimum retirement costs.

However, he cautioned that the long-term impact of inflation means overall retirement expenses will remain elevated, with pension pot targets for moderate and comfortable living, especially for one-person households, remaining “staggeringly high.”

Selby warned that current minimum auto-enrolment contributions risk leaving savers short, calling for increased saving rates to prevent a “retirement shock.”

"The big danger here is that, without a scaling up of minimum contributions, millions of people will sleepwalk into a retirement shock and be forced to choose between working longer or living on less money in their later years," he added.

Standard Life managing director for workplace and retail intermediary, Gail Izat, also commented on the impact of auto-enrolment contribution levels: "Many people are lulled into a false sense of security by thinking that the default contribution levels will deliver the type of retirement they aspire to."

Izat stated that there needs to be a "sustainable roadmap towards higher contributions" which she said Standard Life hopes the next phase of pensions review will take into account.

Royal London consumer finance specialist, Sarah Pennells, called the RLS “invaluable” in helping people to put a price on how much different lifestyles in retirement could cost them.

“We know that many people are not saving enough to have the lifestyle they would like in retirement, but the updated retirement living standards will help pension savers understand how today’s changing living costs could affect different standards of living in retirement,” she added.

“Understanding the costs of retirement enables people to see how saving into a pension can help them achieve the lifestyle that they want.”



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