Data from the Office for National Statistics on family spending figures revealed that costs peak for household where the main breadwinner is between 30 and 49 years old.
The average pensioner’s household expenditure was £25,000 a year when the head of household was aged between 65 and 74, but drops after to £17,000, despite the rising costs of goods and services. This compares with the average yearly income from the basic state pension of £10,310 a year.
Vince Smith-Hughes, retirement specialist for Prudential, said: “These figures are startling, showing a gulf of more than £14,000 annually between income and expenditure in the early years of retirement if the householders rely solely on the basic state pension .”
He added that pensioners would still have to dig deep into their savings or personal pension plan to make up the difference so saving as much as possible early in working life was key to being able to supplement the state pension and ensure sufficient income for a comfortable retirement.
However the rising prices of housing expense, including rent, repairs, energy and council tax, do not leave much room to save in the run-up to retirement.
According to the survey, recreation and culture was the second largest expense, with housing, fuel and power being the largest lifetime spend at approximately £508,000.
On average a UK household spends £230,000 on recreation and £128,000 on hotels during a lifetime.
Mark Loydall, director and chartered financial planner for Leicestershire-based Cambourne Financial Planning, said: “I wonder if the gulf of £14,000 a year is true as it is a incredibly high figure for pensioners.
“It is obvious that they have not saved early enough but there are other kind of benefits they can rely on, not only the basic state pension. Saving for retirement is always a balance of spending now and saving for later, however there are some people who do seem to have a very unrealistic expectation of what they will receive in retirement compared to their savings.”
Household living costs by age group
30 to 49
50 to 64
65 to 74
75 and over
Source: ONS Family Spending Report 2012