You may need to review your retirement planning after updated figures show some increases of over a quarter for retirement income needs.

How much income do you need in retirement?

If you find yourself struggling to answer, you are not alone. It is never easy to calculate as each of us have our own ideas about what we want from retirement. A study by the Pensions and Lifetime Savings Association (PLSA) has shown that 77% of savers did not know how much they would need, while only 16% could provide a figure.

Since 2019, research by Loughborough University for the PLSA has regularly addressed the how-much question by considering three different retirement living standards, defined as:

• Minimum: Covers all your needs, with some left over for fun.
• Moderate: More financial security and flexibility.
• Comfortable: More financial freedom and some luxuries

These categories are used to review spending across six broad areas, ranging from housing to helping others. They are costed separately for single people and couples and for London residents and those living elsewhere in the UK. For example, under the heading of holidays and leisure, the three standards currently assume:

• Minimum: One week-long UK holiday.
• Moderate: A fortnight 3* all-inclusive holiday in the Med and one long-weekend break in the UK.
• Comfortable: A fortnight 4* holiday in the Med with spending money and three longweekend breaks in the UK.

The yearly income requirements for each standard are net, which means at the higher levels tax is a significant factor. For instance, the £45,000 of net income required to provide a comfortable retirement for a single person living in London equates to a pre-tax pension income of over £54,000.

This year’s update revealed a 26.8% increase in the income needed for a couple based outside London to enjoy a moderate living standard. For a single person, the rise was even greater – 34.3%. The PLSA attributes the jump to two main factors:

• Disproportionately higher food, household energy and motoring costs; and
• What the PLSA described as “changes in the expectations of what should be included”. For example, the latest research revealed that being able to give financial support to family members has become more important.

The current State pension of £11,502 is not even enough to cover the minimum retirement standard for a single person, although if a couple both have a full entitlement, it will just be sufficient – outside London. And, as has been the source of many complaints from the Women Against State Pension Inequality or WASPI group affected, the State pension does not now start until age 66 (67 from April 2028).

If you aspire to the Mediterranean fortnight rather than seven days of UK weather, or even hope to finish work before your State pension arrives, you need to accumulate sufficient personal retirement funds. Typically, that begins by assessing what you have already have built up and then working out how much extra is required by the time you retire. Like the difficult question about retirement income, it is a set of calculations best left to experts.