Rising costs for everyday needs are rapidly increasing the costs of retirement as pensioners need an extra £68,700 saved up for their retirement compared with April 2022.
Pensioners now need a yearly income of £47,700 for a comfortable standard of living in retirement, an increase of £4,200 compared to April 2022.
A person receiving the full new state pension of £10,600 a year would need to find an extra £37,100 in private pensions or other income to get by.
Alice Guy, head of Pensions and Savings at interactive investor, said: “High inflation over the last 18 months has had a devastating impact on the spending power of people’s pension income, meaning that they need a lot more pension income just to maintain the same spending power.”
The latest calculations are from interactive investor which they based on the PLSA retirement living standards.
To make up the amount needed for a comfortable retirement, an individual needs a private pension pot of around £598,700, with an additional £68,700 needed compared to April 2022.
Even for a very basic standard of living in retirement, a person needs an income of £14,300 a year, an extra £1,400 a year.
They would need a private pension pot worth some £59,900, needing an extra £23,400 compared to April 2022.
Ms Guy said: “These kinds of eye-watering sums are simply unaffordable for pensioners, many of whom have a small private pension pot and little option to make more pension contributions.
“The danger is that withdrawing more from your pension pot could have a long-term impact on your pension wealth – withdrawing too much could mean some pensioners run out of money earlier than planned.
“A minority of pensioners have an inflation-proof final salary pension, but even final salary pensions often have increases capped at three percent or five percent, so pensioners will have to make their money stretch further in times of high inflation.”
Those who want a moderate standard of living in retirement need an income of £28,600 a year, with an extra £1,400 a year to find.
This means they would need a private pension pot worth £290,800 and so would need an additional £42,800 saved up.
Ms Guy urged pensioners to make sure they are getting any support available to them to cover their rising costs.
She said: If you are struggling to make your pension income stretch it’s important to check if you could be entitled to benefits like Pension Credit.
“It’s estimated that around 800,000 pensioners currently aren’t claiming pension credit who could be entitled and the average claim is worth around £3,500.
“It’s also important to make the most of any private pension income. Check your pension fees and investment performance as some pension schemes charge much more than others.
“It may also be worth consolidating small pension pots to make your pension easier to manage, although it’s important to take advice to make sure you won’t lose out on any important benefits by transferring.”
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