Anyone who has spent their life working hard and contributing to society should have a right to a comfortable retirement. Spending your golden years without worrying about food or bills should be a basic right for any UK citizen.
In the article below, we will talk about how much money you need to retire and what actually constitutes a comfortable retirement in the United Kingdom.
How Much Money Do You Need to Retire in the UK in 2023?
According to the Retirement Living Standards, a website approved and supported by the Pensions and Lifetime Savings Association, an individual pensioner should have around £23,300 a year to live moderately. This amounts to around £448 a week, or £1,941 a month, without rent or a mortgage.
However, if we were to include rent, the price you need to save for retirement would almost double, being at £3,930 a month in London, or £2,918 if we include average rental prices for the entirety of the UK, but excluding London.
Similarly, if we included an average mortgage for London, this amount would be £3,296, or £2,700 for a UK average.
With this type of monthly income, you would have security and flexibility, own your own car (with some miles on it), would be able to eat out from time to time, and go on holiday somewhere in Europe every year.
When Can You Retire in the UK?
First of all, you need to keep in mind that there is no fixed retirement age in the UK. The only exception to the rule is certain professions, like firemen for example, who can be deemed physically unfit to carry out their duties once they reach a certain age.
What does vary, however, is the age when you can access your state pension, your pension pot, and your final salary workplace pensions. The later you retire, the more you can maximize your retirement income, both from the state pension and your investment.
Now, if you were born after the 5th of April, 1960, you can access your state pension once you reach 67. However, the UK government plans to move this limit to 68 in the next decade. If you were born before 1960, you are (or already have been) able to access your pension at 66.
Pension pots and final salary workplace pensions depend on the contract and your pension provider, but usually, it's somewhere between 55 and 65.
How Much Money Do You Need to Retire Comfortably in the UK?
It depends on your lifestyle preferences, current income, and when you started saving and investing for early retirement. The sooner you start saving, the better the returns on your investments will be. Starting early on, accruing compound interest on your pension fund is especially important.
So with that in mind, let's do some math.
In order to retire with moderate comfort in the UK, you need to have a monthly income of £2,918 if you're renting, £2,700 if you're just paying for your mortgage, and £1,941 if you own your own home. If you're living in London, you need to have £3,930 if renting and £3,296 if you're paying a mortgage.
This income can come from any source, be it your pension, your savings, investments, rental properties, or a job on the side, it doesn't matter. This is the amount of money you need to have in your bank account every month to enjoy a comfortable pension.
Note, however, that the math in this article includes current rental prices, mortgages, and the average cost of living costs. In other words, things may change as the economic landscape of the UK and the world changes.
So, let's say you are saving for retirement in the UK and want to retire early. Furthermore, let's say you will live until you're 90. And let's also consider that you are not renting but have an average mortgage that lasts for 20 years, which you got when you turned 30.
Retiring Early in the UK
Retiring at 30
Retiring at 30 means needing £1,397,520 worth of savings if you already own your home, which you can spread out across 60 years or 720 months. However, if you're paying off an average 20-year mortgage, you will need £1,579,680.
Retiring at 40
If you wish to retire at 40 in the UK, you will need £1,255,680, with ten years left in your mortgage.
Retiring at 50
Now, if you are fifty years old and your mortgage has been paid off, you will need £931,680 if you want to retire comfortably.
Retiring at 60
Now, let's say you want to retire just a couple of years before the UK average.
Retiring at 60 means you will, hopefully, have another 30 years. Currently, a pensioner can lead a moderately comfortable lifestyle with £23,300 per year (not including housing costs). You will need £699,000 as your retirement savings, in whichever form you find suits you best.
Add an extra £3,240 for every year of mortgage payments you have left.
Additional Information on Retiring in the UK
Everybody’s circumstances are different, as are people’s wishes and plans. For that reason, we need to talk more about retirement. For some, choosing the right time to retire means retiring early as possible and living a humble life. Others may want as much luxury as possible in their golden years.
£37,300 a year means you have a very comfortable retirement income in the UK.
Or, £54,500 for a couple. This number provides a pensioner with a great deal of comfort, financial freedom, and even some luxuries.
However, if we include average mortgage prices, this number would be £69,700, or £86,900 for couples.
Now with this income, an average UK pensioner couple can spend £144 a week on food, have their relatively new car replaced every couple of years, fix up their kitchen and bathroom every 10 to 15 years, and even spend 3 weeks in Europe annually.
A UK pensioner needs £12,800 a year to cover their basic needs and has just a little left over.
For a couple, it amounts to £19,900 in retirement income. This amount lets the pensioner cover all of his or her basic needs, bills, good food, as well as a week of vacation spent in the United Kingdom. If we include average mortgage costs for an acceptable middle-class home, this number climbs up to £45,200
This sum does not, however, allow for a car and doesn't leave much room for anything more than basic home maintenance.
How much does a married couple need to retire in the UK?
In order to live a moderate lifestyle with some financial security and freedom, a married couple would need £34,000 a year. This amounts to roughly £653 a week, or £2,833 a month. With rent, this is increased to £5,533 a month.
In comparison, the average UK retirement income for couples, according to the latest government data, amounts to £511 per week. Neither estimate includes housing costs.
The average wage in the UK was £640 per week in 2022.
When you're thinking of saving for retirement, you need to consider your current finances. For example, a comfortable retirement requires £37,300 a year (without housing costs), while the average wage amounts to £33,280 a year.
This can make it difficult for an average UK citizen to achieve a comfortable retirement without making smart investments and getting a very good employer-backed pension plan, especially if they do not own their home.
The average UK retirement income was £246 a week in 2021.
£23,300 a year can provide a pensioner with an ok lifestyle. However, the average annual retirement income in the UK for a single pensioner is barely above £12,800, which is actually the minimum prescribed by the Retirement Living Standards organization.
The 2023-2024 full annual UK state pension is at £10,600 a year, or £203 a week.
In comparison, this is barely above 80% of the UK average retirement income.
11% of UK pensioners live in absolute poverty.
And 15% live in relative poverty.
Relative poverty represents an income level that allows an individual to cover their basic needs but nothing else. Absolute poverty, however, means the individual cannot even afford the basics, such as bills and food.
The Bottom Line
Figuring out how much you need to retire might seem like a daunting task at first. Just remember that this is a marathon, not the hundred-meter dash. Start saving early, think about your contributions and investments, and you will be fine.
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