The average pension pot needed for a “basic” retirement has risen by almost 60% in three years, according to research that highlights how the UK cost of living crisis has left many workers fearing they will never be able to retire.
The study from the Resolution Foundation thinktank and the Living Wage Foundation found that a number of price rises across housing, energy, food and transport had helped “significantly” increase the cost of securing an adequate income in retirement.
According to the researchers, the average pension pot required for a basic standard of living in older age has jumped from £68,300 in 2020-21 to £107,800 in 2023-24.
Researchers found that, on average, a worker needed an income of £19,300 a year in retirement to achieve a basic standard of living. However, this figure masked wide variations depending on whether someone owned or rented their home and was single or part of a couple.
When averaged out across different types of relationship, housing type, gender and average life expectancy, the researchers calculated that the average pension pot size needed in addition to a full state pension to achieve an annual income of £19,300 in retirement was £107,800.
The full rate of the new state pension is now £221.20 a week, or £11,502 a year.
Other organisations have also signalled that the cost of living crisis has pushed up the estimated amounts people will need in retirement.
The Pensions and Lifetime Savings Association has developed the “retirement living standards” index to show what life in retirement looks like at three different levels – minimum, moderate and comfortable – and earlier this year said the amount a single person needed to meet the minimum threshold had risen to £14,400 a year.
To get up to the moderate threshold would require about £31,300 a year, while the price for a comfortable standard of living in later life had climbed to £43,100 a year.
A poll of 3,000 people by the Living Wage Foundation, released along with the new research, found that 53% of UK adults saving into a pension felt they would never be able to retire, while 62% felt they would have to work several years beyond retirement age.
Low-paid workers, women and those renting their home “had more negative feelings” about their retirement savings and the future.
Katherine Chapman, the director of the Living Wage Foundation, said: “The news that workers now require a significantly larger pension pot to cover basic living costs in retirement will undoubtedly be alarming for many, particularly low-paid workers who have borne the brunt of rising prices over the past two years.”
