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The annual cost of a comfortable retirement has risen by £2,000
New figures highlight the challenges many face to save enough for retirement, with just 9% on track to afford a 'comfortable' lifestyle
Holly covers personal finance topics from credit cards to wills. She enjoys turning complex money matters into clear, practical advice.
The annual cost of retirement has increased across all standards of living, according to new figures from Pensions UK.
A ‘minimum’ standard of living for a retiree who lives alone now costs £13,900 a year – up £500 from last year. A comfortable retirement for a two-person household now costs £62,700, an increase of £2,100 from 2025.
Here, we explain what’s happening to retirement costs and share tips on how to build your retirement savings.
The rising cost of retirement
The retirement living standards have been developed by Pensions UK to help people understand how much life in retirement will cost.
The research is based on in-depth conversations with the public, reflecting what people think everyone needs for a ‘minimum’, ‘moderate’ and ‘comfortable’ standard of living and covers things like food and bills, household maintenance and holidays and activities.
This table shows the annual cost of retirement at each standard, and how the costs have changed since last year.
| Single-person household | Change since last year | Two-person household | Change since last year | |
|---|---|---|---|---|
| Minimum | £13,900 | + £500 | £22,500 | + £900 |
| Moderate | £32,700 | +£1,000 | £45,400 | +£1,500 |
| Comfortable | £45,400 | +£1,500 | £62,700 | + £2,100 |
Source: Calculated by the Centre for Research in Social Policy at Loughborough University on behalf of Pensions UK
This year, the cost of retirement has risen across all three standards. According to Pensions UK, this is driven by increased everyday costs across categories such as food, household bills and transport, as well as social activities and hobbies.
Many people aren’t saving enough
Pensions UK says that around 82% of the working population are expected to reach the minimum standard of living in retirement, with just 23% and 9% expected to reach the moderate and comfortable standards respectively.
Last week, the Pension Commission warned that 15 million people are undersaving for retirement.
The Commission is currently looking at how to improve retirement outcomes for savers, with final recommendations expected next year.
Key areas of focus include auto-enrolment contribution rates, and measures to address pension participation gaps among self-employed people, women, carers, disabled people and some ethnic minority groups.
Professor Matt Padley, co-director of the Centre for Research in Social Policy at Loughborough University, said: 'We know that many people are not saving enough for retirement, but we also know that for some people it is simply impossible to save any more – you can’t save money you don’t have.
'By providing a benchmark, the retirement living standards can help us to think through the roles of the state, employers and individuals in ensuring everyone is able to have at least a minimum standard of living in retirement.'
Gary Smith, senior client partner and retirement specialist at wealth management firm Evelyn Partners, warned that costs will be far higher for those further away from retirement: 'The incomes are based on the current cost of living, so younger and middle-aged savers need to adjust for inflation.
'If someone currently needs a post-tax income of £45,400 for a “comfortable” lifestyle, they’ll need a lot more in 20 years’ time. If inflation averages 2.5% over the next two decades, that’s roughly £74,800 by 2046.'
- Find out more: why women face a poorer retirement
Why some retirees face higher costs
Retirees who live alone face a more expensive retirement than those who split household costs with someone else. This is because many expenses – such as energy bills, broadband and home insurance – cost the same whether or not you share with someone else.
While two people receiving the full state pension will have enough to achieve a minimum standard of living, retirees who live alone must rely on additional savings to fill the gap. In 2026-27, the full state pension is worth around £12,548 a year, around £1,350 short of the minimum annual expenditure for a one-person household.
The retirement living standards also assume you own your home outright, meaning if you’re likely to face rent or mortgage costs in retirement you’ll need to factor these in on top.
While around 80% of those aged 65 and over in England currently own their own home, many future pensioners are expected to face higher housing costs than ever.
The rate of pensioner homeownership is expected to fall to 70% by 2050, at which point, half of all pensioners in poverty are projected to be renters according to figures published in the Pension Commission’s interim report.
- Find out more: what living alone means for your retirement planning
How much will you need to save?
The retirement living standards are a useful guide to how much life in retirement will cost. The next step is working out how much you’ll need to have saved in your pension to afford your desired lifestyle.
This table gives you an idea of how much you would need to save in your private pension to afford the moderate living standard, depending on whether you access your pension via drawdown or annuity. These calculations assume you receive the full state pension.
| Total amount needed if using drawdown | Total amount needed if buying an annuity | |
|---|---|---|
| One-person household | £329,000-£386,000 | £335,000-£505,000 |
| Two-person household | £332,000-£389,000 | £340,000-£510,000 |
Note: these figures are based on current UK tax thresholds. Annuity figures are based on an assumed rate of 5%-7.5% and calculated by Pensions UK. Drawdown figures are calculated by Which? and assume annual investment growth of 3%-5%, inflation of 1% and charges of 0.75%.
These figures are intended to give a rough idea of how much you’ll need to save, but there are many factors that will affect how much you need, including how long you live, annuity rates and investment performance.
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Join Which? MoneyHow to build your retirement savings
1. Understand how much state pension you’re likely to get
The state pension is the foundation of most people’s retirement savings, but not everyone receives the same amount: you need at least 10 years’ of National Insurance contributions to receive any state pension and 35 years to receive the full amount.
Check your state pension forecast for an estimate of how much you’re on track to receive. If there are gaps in your National Insurance record, you can consider buying voluntary contributions. But make sure you’re claiming any National Insurance credits you’re entitled to first.
- Find out more: should I top up my state pension?
2. Work out how much you need to save
To enjoy a more comfortable retirement, you’ll need to supplement your state pension with income from a private pension. The earlier you can start contributing into a private pension the better, as your savings will have longer to benefit from investment growth.
Check our guide to find out roughly how much you’ll need to save each month to meet the moderate standard of living, depending on the age you start paying into a pension.
3. Get all the support you're entitled to
You’ll generally receive tax relief on any pension contributions up to £60,000, which will significantly boost your savings. If you’re a basic-rate taxpayer, this means you’ll receive an extra £20 for every £80 you save into your pension.
The amount of pension tax relief you’ll receive depends on the rate of income tax you pay. If you’re entitled to more than 20%, you may need to proactively claim the additional tax relief from HMRC.
If you pay into a workplace pension you’ll receive employer contributions of at least 3% of your earnings, but some pay more or will offer to match contributions.
Zoe Alexander, executive director of policy and advocacy at Pensions UK, encourages people to see if their employee is prepared to contribute more than the minimum rate: ‘This could help bridge the gap until policy catches up and we see higher savings levels set in legislation.’
- Find out more: calculate pension tax relief
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