- Singles need £187,000 more
- Costs rise with inflation
- Couples save easier, less
While Valentine’s Day may be causing financial strain for couples nationwide at the moment, data indicates that single individuals require an additional £187,000 in their pension fund to ensure a “moderately comfortable” retirement.
That amount could rise to £414,000 in forty years, when today’s youth retire, according to calculations by Interactive Investor using data from the Pension and Lifetime Savings Association.
The retirement income figures compiled by the PLSA exclude housing expenses and are after-tax. They represent the cost of a modest, comfortable, and fundamental later existence for individuals and couples.
The ‘retirement living standards’ established by the association are extensively employed within the pensions industry as a metric to assess the financial requirements of individuals during retirement, contingent upon their expenditure patterns.
The persistent inflation, specifically the 8% surge in food prices since they peaked at 19.2% in March of last year, has placed a strain on the finances of pensioners, compelling them to allocate a greater portion of their funds towards necessities such as food and heating expenses.
Individuals seeking a comfortable retirement today will require approximately £377,000 in pension funds, which is nearly double the amount required by each partner in a couple (£189,000).
At present, this necessitates an extra £12,187 in annual pension income to accommodate couples.
Retirement Gap: Singles vs Couples
Alice Guy, director of pensions and savings at Interactive Investor, remarked, “As the cost of living rises, a tremendous chasm is widening between retired couples and singles.”
However, the contrast becomes even more pronounced for prospective retirees due to inflation’s long-term effects.
“Being single can be a double-edged sword, making it more difficult to save and increasing the cost of daily living, requiring individuals to have a larger pension pot to maintain the same standard of living in retirement,” she further explains.
“Many of our living expenses remain fixed and do not significantly vary with household size, posing a problem.” Owning a dog or operating a vehicle costs the same for both individuals and couples.
This means that a single person in their mid-20s will need to accumulate an extra £414,000 over forty years, bringing their total pension savings to £832,000, according to Interactive Investor, to match the standard of living of couples.
Conversely, individuals planning to retire in forty years as a couple will only need £418,000 to retire comfortably, an increase of merely £4,000 over the amount required for an individual.
Singles vs Couples: Pension Planning
Individuals in their twenties who are single would be required to contribute an additional £425 per month to their pension, in addition to the contribution from their employer. This is assuming a 2% annual increase in contributions and a 5% investment return.
Conversely, individuals in committed partnerships must contribute an estimated £215 monthly to their pension funds, using the same assumptions.
Young individuals must start saving immediately to attain such pension savings.
Nonetheless, being in a relationship should not deter you from maximising your contributions to a pension fund. One who is overly dependent on a partner may require a greater amount of funds during retirement to provide for their needs.
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Guy further stated, “Life is also unpredictable, and it is not uncommon for individuals’ circumstances to change; many become single prior to or during retirement.”
Others find themselves unexpectedly solitary due to divorce or separation, while many become widowed.
“Preparing ahead and understanding the circumstances in the event of one of you passing away is crucial.” A surviving spouse will typically receive only half of the amount from many final salary pensions, and the majority of individuals will receive only one state pension upon the demise of their spouse.
