Inflation drives 18% surge to 'minimum' cost of retirement

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Inflation drives 18% surge to 'minimum' cost of retirement
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  1. A reduction in the age that people can begin saving through auto-enrolment from 22 to 18 years.
  2. Phased abolition of the £6,240 lower earnings limit to make it easier for lower income and part-time workers to save for their retirement.

“The current AE system disproportionately disadvantages the youngest workers, part-time workers, and those with multiple lower-paid or part-time jobs,” she added.

“Removing the lower earnings limit could have the biggest impact on closing the gender pension gap, because it would mean women in a pension scheme would get a contribution from the first pound they earn.

“The clock is ticking. The longer it takes for action, the less there will be in the pension pots of lowers earners, people with multiple jobs and part-time workers – and particularly part-time working women.”

A DWP spokesperson said: “Our ambition for the future of automatic enrolment will enable people to save more and to start saving earlier.

“However, we also recognise current concerns with rising prices and are committed to ensuring people have the support and information they need to make informed choices about their financial futures, with free and impartial guidance available via Pension Wise and Money Helper.”

Changes to the living standards required pot sizes

The retirement living standards are regularly reviewed to ensure they keep up with changes in the public’s expectations of what retired households need as well as the changes to prices on the shelves to remain relevant to real world retirement spending.

The cost of a minimum lifestyle increased from £10,900 to £12,800 – or 18 per cent – for a single person and from £16,700 to £19,900 – or 19 per cent – for a couple. 

It includes £96 for a couple’s weekly food shop, a week’s holiday in the UK, eating out about once a month and some affordable leisure activities about twice a week. 

Source: PLSA

PLSA said rising food and fuel prices contributed significantly to the increase in the minimum standard. 

The update also saw the amount of food included within the budget increasing to bring it into line with the up-to-date nutritional research on a healthy diet.

Source: PLSA

PLSA said the disproportionate increase in the cost of retirement for those on the minimum retirement living standard means the government’s commitment to the state pension triple lock, announced in the most recent Autumn Statement, is especially important.

Rising by a record 10.1 per cent to £10,600 per year, a couple who are each in receipt of a full new state pension would reach the minimum retirement living standards.