Solo savers require an additional £160,000 in their retirement funds to offset the economies of scale that come from being part of a couple, according to a new analysis by Standard Life.
The analysis, employing the MoneyHelper annuity tool, delves into the disparities in pension funds necessary to secure different retirement living standards as defined by the Pension and Lifetime Savings Association (PLSA).
The analysis indicates that achieving a basic living standard, including essentials and an annual UK holiday but excluding car ownership, requires an annual income of £12,800 as per PLSA guidelines, necessitating an extra £2,300 per year beyond a full state pension of £10,600.
Furthermore, about £53,000 in retirement savings are needed for a guaranteed lifelong income through an RPI-linked annuity, based on current rates.
Pensioner couples need £19,900 annually for an equivalent living standard; with two full state pensions, they bypass the need for additional savings.
For a moderate retirement standard including a car and bi-annual foreign holiday, single pensioners require £23,300 yearly, and for an annuity of £14,900, roughly £315,000 in savings is needed, whereas couples seek £34,000 annually, attainable with a joint pension pot of £310,000 or £155,000 individually – around half of what a single pensioner requires.
A comfortable retirement lifestyle including a three-week foreign holiday, home upgrades, and clothing budget of £1,500 per year requires single pensioners to have about £675,000 in savings, while pensioner couples need a combined £835,000 or around £418,000 each, revealing a significant £257,000 gap for single pensioners to match couple’s retirement standards.
Standard Life managing director retail direct Dean Butler says: “Whether single by choice or by circumstance, single people have to front a whole host of expenses on their own – from mortgage or rent payments, utility bills and council tax, to broadband, holidays and TV subscriptions – and unfortunately these aren’t automatically half the amount that couples pay.
“It’s a similar situation when it comes to pension savings too. While couples can pool their finances for retirement, single people need to support themselves independently. As our analysis shows, single pensioners need to amass a bigger pension pot to achieve the same standard of living as pensioner couples.
“It’s therefore particularly important that single people start thinking about their retirement finances as early as possible. It’s also a fact of life that not all relationships last, and there’s a chance couples will divorce – in this scenario, awareness of these figures are a good place to start when thinking about how to approach Pension sharing and the possibility of a single retirement. Knowing the sort of lifestyle you want in retirement will help you plan, and the PLSA Retirement Living Standards tool outlines the savings target that you might need to get there.
“Saving into a pension from an early age will give your money as much time as possible to grow and benefit from possible compound investment growth, while boosting your pension contributions is also a great way to build up savings.
“Consider making top ups to the amount you regularly pay into your pension if you get a pay rise for example, or make a one-off contribution following a bonus. Clearly, it’s a difficult economic environment at the moment, but your future self will thank you for taking any opportunity to put money away for retirement.”
