The golden years of retirement might be becoming a bit more expensive. Latest insights from iSIPP, who’s speciality is UK and international customers who wish to consolidate UK pensions, reveals a noticeable surge in the cost of a comfortable retirement by nearly 20%. Retired households are now spending an average of £23,675 annually, a significant increase in the face of lifting pandemic restrictions and a worrying inflation trend. This points to the crucial importance of having substantial retirement savings apart from the State Pension.
Key Points:
- Comfortable retirement costs have surged by almost 20% as retired households’ average spending hits £23,675 annually.
- A study of the latest Government statistics reveals weekly expenses for retired households (65 to 74 years old) sum to £23,675 yearly.
- The spending increase is partially attributed to post-pandemic circumstances and surging inflation.
- The rise in spending emphasises the need for workplace pension and retirement savings in addition to the State Pension.
- Transport, bills, housing maintenance, food, and recreation are among the major costs for retirees.
Retired Households: The Price of Comfort
An in-depth examination of the recent Government data by iSIPP demonstrated that retired households, specifically those aged between 65 and 74, are spending a weekly sum of £455.30. Annually, this accumulates to a staggering £23,675, marking a 19% hike from the £383.40 weekly or £19,936.80 yearly expenditure recorded in 2021.
Rising Inflation and Pandemic Effects: Dual Culprits
This considerable rise in spending is attributed not just to the end of COVID-19 restrictions but also to the climbing inflation rates. This mounting inflation has escalated the costs for retired households, placing additional strain on their retirement savings.
The State Pension Conundrum
Moreover, this spending surge brings to light the crucial importance of having substantial retirement savings apart from the State Pension. Households depending solely on the full flat-rate State Pension, presently valued at £203.85 weekly or £10,600.20 yearly, would have a mere 44% of the necessary funds to ensure a comfortable retirement. The situation is even bleaker for those relying on the basic State Pension, valued at £156.20 weekly or £8,122.40 yearly.
Expenditure Breakdown: Where Does the Money Go?
iSIPP’s analysis further dissected the primary expenses for UK and international customers planning to consolidate their pensions. The key spending areas include transport (which includes both car ownership and public transport fares), bills, housing maintenance, food, and recreational activities.
| Expenditure Category | Percentage of Annual Spending |
|---|---|
| Transport | 14% |
| Bills & House Maintenance | 13% |
| Food | 12.5% |
| Recreation & Leisure | 12% |
| Restaurants (UK & Overseas) | 7% |
Interestingly, restaurant spending both in the UK and overseas has doubled, accounting for 7% last year, compared to a mere 3% previously.
Age-Based Spending Variations
A fascinating trend emerges as retirees age. As households hit the 75-year threshold, annual spending dips to a weekly average of £356.30, or £18,527.60 a year. Despite this decline, it’s still an 18% increment from the £302.60 weekly or £15,680 annual spending in 2021.
A Comparative Look: Overall Household Spending
Zooming out to look at the average annual spending for all UK households, the figure hovers around £27,500. However, the highest spenders are those aged between 30 and 49, with an annual expenditure of £31,636. The economic pressures and spending habits appear to change significantly across various age brackets, reflecting the diverse financial needs and responsibilities at different life stages.
iSIPP Managing Director Hrishi Kulkarni said: “The cost-of-living crisis is pushing up bills for all households and increasing the cost of maintaining a comfortable lifestyle.
“The pressure can be most acute for retired households who have fewer options to increase their income to keep pace with rising prices and is particularly painful for those households without private retirement savings.”