The thought of giving up work and enjoying your golden years in retirement may sound great, but it is getting more expensive.
New data from the Pensions and Lifetime Savings Association (PLSA) shows the cost of a comfortable retirement has jumped again – meaning most people will need a much larger pension pot than originally anticipated if they want to enjoy this kind of lifestyle in life after work.
The PLSA regularly puts out figures showing how much it costs to fund a minimum, moderate and comfortable level of retirement.
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Its latest findings, released in summer 2025, show the cost of higher inflation has hit retirees, though this has partly been offset by falls in energy costs, dropping by 7% from July under the latest energy price cap.
Across all retirement living standards, the weekly domestic fuel budgets – the amount spent on energy in the home for things like heating and cooking – have fallen by more than a quarter since last year.
At the moderate and comfortable levels, energy costs have fallen by £16.74 and £15.38 per week respectively for two- and one-person households.
The PLSA data shows a ‘moderate’ standard of living in retirement now costs a single person £400 or 1.2% more than it did in 2023/2024, while the level of funding needed for a comfortable retirement is also on the rise.
However the cost of a minimum retirement has fallen slightly, to £13,400 down from £14,400, a drop of almost 7%, due to the impact of lower energy prices and changes in the public’s expectations for this standard of living.
For a two-person household at the minimum level of retirement, the fuel budget has fallen by £12.44 per week, making up a significant part of the total decrease.
For one-person households, the drop is £8.82 per week.
The overall amount needed for retirement depends if you are living alone or with someone else and while the increasing state pension and rising annuity rates may help, you may also have to save more for your desired standard of of living.
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.”
The PLSA’s latest retirement standards also use new language to better reflect how retirees live today and how they plan to live in the future.
The terms “one-person” and “two-person” households have replaced “single” and “couple” to recognise that not everyone in retirement lives with a romantic partner – but many do share their housing and multiple living costs with someone.
Three quarters (75%) of retirees live with a member of their family – a spouse, children, parents, or other relatives, the survey found.
Meanwhile 22% live alone and 3% say they live with someone other than a family member.
When looking ahead, most (77%) non-retired people expect to live with someone else when they retire. Only 23% expect to live alone.
When asked who they’d be willing to live with in retirement to help share costs like housing and bills, only 12% of people said “nobody” and wanted to live alone – suggesting an openness to shared living in order to help stretch pensions further, including the possibility of roommates and house shares.
Alexander said; “We’re not just seeing changes in costs, we’re seeing changes in how retirees live. Retirement isn’t a one-size-fits-all experience. The standards recognise that retirees can share costs, often with a partner, and that can make a huge difference to affordability in later life.”
How much does a 'comfortable' retirement cost?
The amount you will need to retire comfortably will depend on your own lifestyle and spending needs.
The costs of enjoying the finer things in retirement has risen from £43,100 to £43,900 a year for a single person household and from £59,000 to £60,600 a year for a two-person household.
The cost of a comfortable retirement allows for spending on extra luxuries such as regular beauty treatments, theatre trips and two weeks of holiday in Europe a year.
Interactive investor highlights that these figures are after paying tax, so you technically need to earn more to meet these standards.
For this level of retirement, the PLSA calculated someone living alone would need a pension pot of around £540,000 to £800,000, if using it to buy an annuity for a guaranteed income. For two people sharing bills it would be £300,000 to £460,000.
How much does a 'moderate' retirement cost?
To achieve a moderate retirement, you would need a pension pot of around £31,700 (previously £31,300) for a single person and from £43,900 (up from £43,100) for two people living together.
The cost of a moderate retirement is based on eating out sometimes, running a small second-hand car, having a week holidaying in Europe and a long weekend break in the UK.
For a moderate retirement living standard, the PLSA calculated a pension pot of around £330,000 to £490,000 is needed for a single person household, and £165,000 to £250,000 for a two person household sharing bills, if buying an annuity.
Alice Guy, head of pension and savings at interactive investor, said: “It’s important to remember that these figures don’t take account of any housing costs in retirement. Many of those currently in their thirties and forties will be renting once they reach retirement so could need a lot more in their pension to achieve a moderate standard of living in retirement.”
Becky O'Connor, director of public affairs at PensionBee, adds that what is considered a minimum, moderate or comfortable living standard for retirees remains a mostly subjective judgment.
“The steep rise in the amount required to fund a moderate lifestyle is partly a reflection of higher living costs but also partly linked to rising expectations around this ‘average’ standard,” she says.
“Emerging priorities such as the ability to eat out more, enjoy more time out with loved ones and help out family members financially highlight the evolving expectations and desires of the future generation of retirees.
“While the PLSA suggests a new set of life priorities could be down to the experience of Covid, it could also simply be that the financial demands placed on retired people, including by adult children who are themselves struggling to afford a decent lifestyle, are higher than they have ever been."
How much does a 'basic' retirement cost?
For a no frills type of retirement, you would still need a pension pot of £13,400 – though this is down from £14,400. For a couple, this has fallen to £21,600 from £22,400.
These costs are based on a week’s holiday in the UK, eating out about once a month and some affordable leisure activities about twice a week. It does not include the budget to run a car.
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Retirement Living Standards: 2024/25
Annual expenditure
Single person
Couple
Minimum retirement
£13,400
£21,600
Moderate retirement
£31,700
£43,900
Comfortable retirement
£43,900
£60,600
Source: Pensions and Lifetime Savings Association
How much will you need in your pension pot to fund your retirement lifestyle?
The PLSA highlights that the full annual new state pension – currently £11,973 – will help fund much of the minimum standard but you will need a larger pension pot to buy an annuity or earn enough from drawdown for a moderate or comfortable retirement.
Analysis by Quilter for MoneyWeek suggests that a single person would need a pension pot worth £459,000 to get a moderate level of income from an annuity, rising to £738,000 for a comfortable retirement.
A couple would need £515,000 to purchase an annuity for a moderate lifestyle and £929,000 for a comfortable one.
This assumes an annuity rate of 5.34% for a single person and 4.79% for a couple.
The amount you need to put away in a pension to build a pot worth £738,000 will depend how far away you are from retirement.
If you have 40 years to save, then you would only need to put away £7,4677 per year, according to Quilter.
But that rises to £12,652 over 30 years and £23,830 over 20.
This assumes a 4% annual real return.
“What the figures continue to show is that it will take a concerted effort to achieve a pension pot required to meet the difference between the income level indicated by the standard and that provided from the full state pension,” says Jon Greer, head of retirement policy at Quilter.
“The earlier that savers understand the difference, then the easier it will be to plan how to achieve it – or achieve the target that’s personal to you. Unfortunately, no one is going to do it for you.”
AJ Bell estimates that to obtain these standards in drawdown, a single person would need a pension pot worth £490,000 for a moderate lifestyle or £790,000 for a comfortable one.
This rises to £515,000 for couples wanting a moderate lifestyle and £890,000 for those seeking a comfortable standard.
The figures are based on annual investment returns of 4% after charges, that income rises by 2% per year and the pot lasts for 25 years.
“Spikes in inflation have clearly made that task harder but there is no magic bullet when it comes to building a retirement pot that matches your goals and spending plans,” says Tom Selby, head of retirement policy at AJ Bell.
“The key is to save as much as you can from as early as possible, taking advantage of the upfront boost of pension tax relief, tax-free investment growth and, where available, employer contributions. While the fund sizes needed to achieve a moderate or comfortable standard of living might be intimidating, making a realistic budget and setting up a regular savings plan can make the task a lot less painful.”
How to boost your retirement savings
It can be hard to find the extra cash to increase pension contributions to ensure you meet the retirement living standards you desire, especially with other bills rising.
But gradually increasing how much you put into your pension could help boost your retirement fund.
Analysis by wellbeing platform WEALTH at work suggests someone in their 20s saving an extra 1% a year with their employer matching this, may be able to increase their pension pot in retirement by 25%.
For example, a 25-year-old basic rate taxpayer earning £40,000 per year could increase their contributions by 1% of salary, matched by their employer.
The cost to the employee of this increase is a reduction in take home pay of less than £23 per month or £272 per year but this would boost their pension pot at retirement by 25% from £198,683 to £248,353.
This assumes their salary increases by 2.5% each year, pension charges of 0.75% apply, investment growth is 5% each year and the pension value is adjusted for inflation at 2.5% each year.
“Small increases can have a significant impact on your pension savings, but small reductions in your pension savings can also make a huge dent," says Jonathan Watts-Lay, director, at WEALTH at work.
Even the state pension alone at £11,973 per year would take you close to the £12,570 personal allowance tax threshold so any income above that would push a pensioner into paying the basic rate of tax.
Once you start taking income from your pension through either drawdown or an annuity, you also have to consider how this will hit your tax bill and manage withdrawals.
One popular method of accessing a pension pot is the 4% rule.
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Marc Shoffman is an award-winning freelance journalist specialising in business, personal finance and property. His work has appeared in print and online publications ranging from FT Business to The Times, Mail on Sunday and the i newspaper. He also co-presents the In For A Penny financial planning podcast.
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