Pensioner households need at least £20,000 a year in income

State pension will only cover just over half even after next year’s inflation-linked increase.

Biggest costs are food, energy and house bills, transport, and recreation – but costs drop once you hit 75.

Our analysis of government data shows that pensioner households need a basic £20,000 a year in income for a comfortable retirement but inflation is increasing the pressure on their finances.

The latest government data shows retired households aged between 65 and 74 spend £383.40 a week adding up to £19,936.80 a year.

Households relying on the full flat-rate State Pension alone – currently worth £9,627.80 – face a £10,300 shortfall and will still be struggling when it increases to £203.85 a week or £10,600.20 a year from April next year. The basic State Pension is expected to increase to £156.20 a week from £141.85.

The analysis suggests that the biggest costs facing pensioners are food, bills and housing maintenance, transport, and recreation.

Food accounts for around 16% of annual spending while bills and house maintenance eats up 15%. Transport accounts for 12% of annual spending and recreation and leisure spending takes up 11%.

Annual spending appears to drop once households hit the age of 75 with the average spending £302.60 a week or £15,680 annually. UK households on average need £25,040 a year while spending peaks for households aged between 30 and 49 at £29,230.

However, current high levels of inflation mean that total spending is likely to be stretched for pensioner households and will remain under pressure.

iSIPP Managing Director Hrishi Kulkarni said: “The cost-of-living crisis is affecting all households with inflation eating away at budgets and making it harder to maintain standards of living.

“Analysis shows retired households need at least £20,000 to maintain a decent standard of living which is challenging for those who have not managed to maximise retirement savings. The State Pension is a valuable safety net and the increase next year under the Triple Lock is very welcome, but people need to focus on building as big a pension pot as possible. It has become even more important for all of us to think how can we put more towards our pension by regularly contributing in addition to consolidating all pensions into one.”

iSIPP’s digital pension solution is available to all customers with UK pension funds who are working or have worked in the UK. Our ‘Choice’ range includes Ready-Made funds from the world-leading fund managers BlackRock and Schroders while the ‘Create’ range offers choice and flexibility with access to more than 100 funds from reputable fund managers.

You may also be interested in these pension insights:

Retired households take a 15.4% direct tax hit on their income

How to protect your pension from rising inflation

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