Cost of minimum retirement falls by £1,000 amid lower energy bills and changing expectations

3 June 2025, 01:33

The minimum amount someone needs in retirement has fallen, amid lower energy prices and people's changing expectations, according to calculations.

The Pensions and Lifetime Savings Association (PLSA) sets three different retirement lifestyles - minimum, moderate, and comfortable, to give people a general indication of the kind of lifestyle they may be on track for in retirement.

The cash amounts for each standard are regularly updated.

This year, the cost of a minimum retirement living standard for a one-person household has decreased by £1,000 per year to £13,400, while for a two-person household, it is £21,600, down from £22,400 a year previously.

The changes are mainly due to a substantial reduction in energy costs and some small spending adjustments made to the living standard by research participants, the PLSA said.

The minimum standard covers people's basic costs, with some money left over for "fun".

Research discussion groups for the minimum standard reported some small changes in what they need for a minimum standard of living, clothing, hairdressing, technology purchases, taxi use, and charitable giving, although participants agreed that the budget for rail travel would need to rise, the PLSA said.

The amounts needed for moderate and comfortable standards have increased slightly, reflecting the impact of inflation across many spending categories being offset by decreases in energy costs, the report said.

For a moderate lifestyle, a single person would need £31,700, up by £400 from £31,300 previously, while two people would need £43,900, up by £800 from £43,100 previously.

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For a comfortable retirement, a single person would need £43,900, up by £800 from £43,100 previously, and a two-person household would need £60,600 - a £1,600 annual increase from £59,000.

The retirement living standard amounts for 2024/25 were calculated by the Centre for Research in Social Policy at Loughborough University on behalf of the PLSA.

Across all retirement living standards, weekly domestic fuel budgets had fallen significantly since the previous 2023/2024 update.

The standards are a guide to the costs of living in retirement and not fixed savings targets.

Zoe Alexander, director of policy and advocacy at the PLSA, said: "For many, retirement is about maintaining the life they already have, not living more extravagantly or cutting back to the bare essentials.

"The standards are designed to help people picture that future and plan in a way that works for them."

She said that for many people, saving more than the minimum contributions required in their workplace pension could help to give them a better chance of the kind of retirement they want.

The PLSA said the role of the state pension also remains vital, particularly for those at the minimum level.

With many people carrying mortgages into later life, the research also underlined the tension between paying off a mortgage and retirement for some households.

More than half (58%) of people said they expect to be mortgage-free homeowners by the time they retire, but 17% expect to be homeowners with a mortgage or loan and 8% expect to be renting from a private landlord.

Meanwhile, 7% expect to be renting from the council and 8% anticipate that they will be renting from a housing association.

And 1% expect to be living "rent free" in retirement - meaning they anticipate they will be living in someone else's home and not paying formal rent.

Professor Matt Padley, co-director of the Centre for Research in Social Policy at Loughborough University, said: "The consequences of the cost-of-living challenges over the past few years are still being felt, and we've seen some subtle changes in public consensus about minimum living standards in retirement, resulting in a small fall in the expenditure needed to reach this standard.

"In these uncertain times, planning in concrete ways for the future is ever more important, and the RLS (retirement living standards) help people to think in more concrete ways about what they want their retirement to look like, and how much they will need to live at this level."