When it comes to the average retirement income, the key factor is not necessarily the raw numbers, but rather the spending power and essential outgoings. According to recent UK figures, many Britons may be surprised to learn how current average earnings compare to current average retirement incomes. If you want to know if you’re saving enough for retirement, this information can give you a good indication.
What is the average retirement income in the UK?
The average retirement income in the UK varies depending on factors such as location and sources of income.
According to government data from 2017/18, the average weekly income for pensioners is £304, after taxes and housing costs have been deducted. This works out to around £15,080 per year. Private pensions are the main source of retirement income for many people in the UK, but state benefits, occupational pension schemes and investments also contribute. You can use a Pension Calculator to get an estimate of how much retirement income you might receive from your private pension.
The average earnings for workers in the UK before tax or housing costs are £30,420. After these deductions, the average net income is £23,111. On the surface, this appears to be 50% more than the average retirement income. However, this does not take into account housing costs, which the average retired person does not have to pay. When factoring in these costs, the average net income for both groups is actually very similar. This is primarily due to the high cost of housing in the UK.
Consequently, while the retired generation may have more disposable income overall, the working generation often has very little left after paying for their housing. In fact, when all is said and done, the two groups have very similar levels of net income.
How much does a married couple need to retire in the UK?
Couples generally have more retirement income than single individuals. According to certain reports, retired couples received more than twice the money as single retirees in 2017/18. This may be due to the fact that housing expenses were incorporated into the research – couples sharing a home usually have lower overheads than someone renting on their own.
Another explanation is that those who enter retirement single have a higher chance of getting divorced or separated, which has a significant impact on their financial situation and thus their ability to save for retirement. People in long-term committed relationships may have a greater capacity to store money for retirement and a stronger drive to do so.
The difference in retirement income for single people compared to couples?
The average retirement income for couples tends to be higher than that of single people, due in part to the fact that couples usually have lower housing costs. Other factors, such as divorce or separation, can also impact a person’s ability to save for retirement and may explain why single retirees tend to have less income. On the whole, however, the net incomes of both retired and working people are quite similar once housing costs are taken into account. This is primarily because housing is so expensive in the UK.
Overall, when taking into account all these different factors, it is clear that the average retirement income in the UK varies depending on the individual’s unique situation. Nevertheless, it is still possible to make a comfortable living in retirement if one is mindful of their spending and makes use of government benefits or private pension funds.
How can you be comfortable in retirement?
A couple should aim for nearly £50,000 a year and a single person just over £30,000. This estimate assumes a lifestyle that includes: occasional overseas travel, eating out once a week, taking two holidays a year and having a few leisure pursuits. Obviously, if you are content to live more modestly then you will need less money.
The average retirement income in the UK is different for everyone, depending on factors such as housing costs, relationship status, and spending habits. This estimate assumes a lifestyle that includes occasional travel, eating out once a week, taking two holidays per year, and having some leisure pursuits. If you are willing to live more modestly, you may be able to get by on less money.
The UK state pension is below the average retirement income, so most retirees rely on private pensions to make up the difference. However, there are a significant number of adults who are not paying into a pension scheme and are unaware of the importance of doing so. This could lead to major financial difficulties later in life. Fourteen percent of adults in the UK who are not receiving a pension do not pay into a pension scheme. The main reason for this is lack of awareness or understanding of the importance of pension schemes. Without saving into a pension scheme, these individuals will have a significant drop in disposable income when they retire.
A good rule to go by would say for example if you have a £100,000 pension pot and you could take £4,000 to £5,000 a year which statistically speaking is usually a good withdrawal so it is sustainable throughout retirement. Bear in mind that the state pension age is set to rise in the future but you can access your private pensions from age 55 currently.
It is also worth noting that these figures are averages and will differ depending on where you live in the UK. For example, living in London or the South East will generally require a higher income than in other parts of the country. This is because the cost of living – particularly housing costs – tend to be higher in these regions. Consequently, if your retirement income is lower than the average but you live in a cheaper area of the UK, you may still find that you can enjoy a comfortable lifestyle.
Retirement Savings
The bottom line is that there is no one-size-fits-all answer to the question of how much income you will need in retirement. However, by carefully considering your spending habits and taking advantage of government benefits and private pension funds, you can ensure that you have a comfortable standard of living in retirement, no matter what your income.
The best way to ensure a comfortable retirement is to start saving early and make regular contributions to your pension scheme. Time is the most powerful tool for retirement saving, as compound interest can grow small contributions into large sums over many years. Even if you only start saving in the years leading up to retirement, every contribution will be boosted by at least 25% due to tax relief, which is better than doing nothing.
Pension Advice
It is difficult to estimate how much income you will need in retirement as it varies depending on factors such as housing costs, relationship status, and spending habits. However, the UK state pension is below the average retirement income, so most retirees rely on private pensions to make up the difference.
Without saving into a pension scheme, individuals will have a significant drop in disposable income when they retire. Bear in mind that the state pension age is set to rise in the future. Consequently, if your retirement income is lower than the average but you live in a cheaper area of the UK, you may still find that you can enjoy a comfortable lifestyle. The bottom line is that there is no one-size-fits-all answer to the question of how much income you will need in retirement.
However, by carefully considering your spending habits and taking advantage of government benefits and private pension funds, you can ensure that you have a comfortable standard of living in retirement. One of the best steps you can take to increase your retirement income is to set out a plan with a financial adviser and stick to that plan. If you would like to speak to a financial adviser in Shropshire then please give us a call on 01743 382002, while we are based in Shropshire we have clients all over the UK so are able to help you wherever you are based.
