The recent announcement that State Pension Age will be going up to 68 even sooner than planned affects six million people who will now have to wait longer for their State Pension. People are retiring later and living longer, so adding in the extra wait for what might be a significant chunk of retirement income, planning has never been so important. 

We all know that paying into a pension is sensible, but do we really know how much adds up to a good retirement? What makes the difference between scraping by and living your retired life the way you want to?

'comfortable' vs 'luxury'

Which? Magazine recently published an article that pitted a 'comfortable' retirement lifestyle against a 'luxury' one, based on average spending data gathered from 1,590 retired couples. 

They estimated that, for a comfortable lifestyle allowing for a few extras such as an annual European holiday, a £26,000 net annual income would be needed. For a more luxurious lifestyle, with a long haul holiday, leisure memberships and a new car every five years, the net income requirement would be £39,000 per year. 

I was surprised the amounts weren't higher considering these figures are for couples, not individuals. I would hazard a guess that many would expect to spend more than that in retirement, and the definitions of 'comfort' and 'luxury' are going to vary. 

Depending on your lifestyle and things like family, where you live and what you want to spend your retirement doing, you may need significantly more put aside than the research indicates. Of course, you may need less. But the chances are we'd all like to do a bit more than just get by. 

So what do you need to consider?

  • What kind of pension(s) do you have?

Final salary pensions are a dying breed these days, but a fair number of companies still have them, if only as legacy arrangements. If you are fortunate to have a reasonable promise from a final salary scheme, the good news is that you have almost certainly got a better head start than most! Remember to make sure you do know what the proposed pension promise is when building your retirement plan. 

Defined Contribution (DC) pensions are more common, especially with the implementation of workplace saving schemes. These types of plans are far more flexible; however, contributions and investment performances are critical factors in achieving a good return. On that basis, it's sensible if you have a DC pension to consider paying in as much as you can if you're not confident the State Pension will provide what you need to achieve your future plans. 

  • State Pension

The full new State Pension is £159.55 per week, so assuming you're eligible, you could get £8,296.60 a year from the State based on current figures. You can check your eligibility and find out how much you're likely to get here. Of course, it's likely that you'll need to find significant additional funds to reach a comfortable lifestyle in retirement. 

  • The elephant in the room - inflation and other cost changes over time

The buying power of your money is inevitably impacted by inflation and other cost changes over the years. The illustrations below show changes to the cost of some common purchases over the past four decades:



Simply put, £39,000 will buy you more now than it's likely to in ten years. It's not enough to make a one-time calculation of desired retirement income and contribute accordingly for an entire career. Times change, the value of money and investments change, and regulary assessment is a much better (and safer!) approach. 

Doing the maths

There's a lot to consider, but the sooner you start planning (or revisit your plans) for retirement, the better. Taking everything into account - income, savings, property, what you want to spend your money on - and keeping your plans up to date will help you to build a healthy retirement pot, and to avoid money-related stress. 


Aug 23, 2017
Andrew Mobberley

Andrew Mobberley

Director of Business Development

Portus Consulting is now part of the Aon Group!