The PLSA reports a significant surge in annual retirement costs, prompting concerns over retirees’ finances amidst a broader context of gender pension gaps and dwindling living standards for the UK’s poorest.
The Pensions and Lifetime Savings Association (PLSA) has reported a marked rise in the annual cost of a moderate retirement in the UK, now reaching £31,300 for a single person in the 2023/24 period—an £8,000 hike from the previous year as decreed by research conducted by Loughborough University. This steep increase is largely attributed to the surging living costs, including food and energy bills, and evolving retirement expectations, such as financial support to family members and greater emphasis on social activities like dining out and going on holidays after the Covid-19 pandemic.
Nigel Peaple, from the PLSA, acknowledged the stress that rising costs exert on retirees’ household finances. Concurrently, the state pension will witness an 8.5% boost to slightly over £11,500 from April 2024 as a countermeasure to increasing living expenses. Nevertheless, Professor Matt Padley from Loughborough University and former pensions minister Sir Steve Webb underscore the urgency of addressing these extra financial requirements of retirees, with Webb particularly emphasising the dilemma of working longer or facing a meagre retirement without substantial action.
In response, the Government has pointed to its efforts to amplify pension savings through methods such as the record-setting state pension cash increase in the previous year and significant rises in Pension Credit alongside the state pension.
Further concerns were raised by a report from NOW: Pensions and the Pensions Policy Institute, highlighting a stark gender gap where women reportedly retire with an average pension pot of £69,000 against men’s £205,000. Factors contributing to this gap include career breaks, caring obligations, childcare costs, and the gender pay gap, necessitating women to work an estimated additional 19 years to match men’s retirement savings.
Drawing attention to another segment of the population, the National Institute of Economic and Social Research (NIESR) revealed that the UK’s poorest households have faced a substantial decrease in their finances since the Covid-19 pandemic began, with the lowest-income homes experiencing living standards 20% lower than in 2019-20. Even after government aid, the poorest families have seen an 18% reduction in living standards from pre-pandemic times. NIESR advises that government focus should be on increasing infrastructure spending to achieve growth rather than contemplating tax cuts.
In a broader context, these reports emphasize the financial strain on different demographics, including retirees, women, and lower-income households, in the face of rising living costs. The state pension increase and government measures aim to partially alleviate the hardships, yet the need for further strategic interventions remains evident to bridge gaps and support adequate living standards across the spectrum.
