Interactive Investor

The £187,000 extra cost of being single in retirement

Figure revealed in new research by interactive investor.

13th February 2024 15:36

Alice Guy from interactive investor

With Singles Day just around the corner, interactive investor crunches the numbers on the additional cost of being single in retirement.

  • Single people currently need £187,000 more in their pension pot than those in a couple to achieve a moderately comfortable retirement, based on the latest PLSA Retirement Living Standards
  • In 40 years, by the time today’s young people retire, this gap will have grown into a £414,000 chasm, according to interactive investor calculations
  • To bridge the gap, single people need to save £210 extra into their pension throughout their working life, assuming their contributions increase by 2% each year.

The calculations show that a single person in their mid-20s, who plans to retire in 40 years, will need around £832,000 in their pension pot to achieve a moderately comfortable retirement, assuming 2% inflation for the next 40 years. To achieve this pension pot, they would need to save £425 per month in a pension, including employers’ contributions, assuming their contributions increase by 2% each year and they achieve 5% investment returns net of investment fees.

In contrast, someone who is in a couple who plans to retire in 40 years needs to aim for around £418,000 in their pension pot to achieve a moderately comfortable retirement. They need to save around £215 per month over 40 years based on the same assumptions.

But despite single people needing more to achieve the same standard of living in retirement, they are often poorer in retirement, finding it hard to save on top of their daily living costs. Research as part of our latest Great British Retirement Survey shows that single people expect a lower income in retirement: £18,000 on average, compared to £19,000 for those who are cohabiting and £25,000 for those who are married.

The additional cost of being single in retirement

Total pension income needed now

Private pension income needed now

Pension pot needed for retiring now

Pension pot needed for retiring in 40 years

Monthly pension contributions needed

Single person

£35,982

£24,482

£376,646

£831,650

£425

Member of a couple

£23,795

£12,295

£189,154

£417,659

£215

Additional cost of being single in retirement

£12,187

£12,187

£187,492

£413,990

£210

Assumptions and sources: total and private pension needed based on PLSA Retirement Living Standards level for a moderate retirement, pension pot needed based on middle of PLSA range £6,500 annuity income per £100,000 pension pot, pension pot needed in 40 years assumes 2% inflation, monthly pension contributions includes employer contributions and assumes 5% investment growth net of fees and 2% growth in contributions each year.

Alice Guy, Head of Pensions and Savings, interactive investor, says: “With the cost of living rising, a huge gulf is opening between couples and those who are single in retirement, with single people currently needing around £187,000 more in their pension pot to achieve a moderately comfortable retirement.

“But the contrast is even more stark for those retiring in the future, due to the long-term impact of inflation. Single people retiring in 40 years will need around £414,000 more than those in a couple to achieve a moderate standard of living in retirement.

“The cost of being single is often underestimated and can be a double whammy, making it harder to save and increasing daily living costs so that people need a bigger pension pot for the same standard of living in retirement. The problem is that many of our living costs are fixed and don’t vary much with household size. Running a car or owning a dog costs the same whether you’re a couple or a single person.

“Life is also unpredictable and it’s common for people’s circumstances to change, with many becoming single before or during retirement. Many people are widowed and others end up unexpectedly single due to divorce or separation. That means you could end up needing more in retirement to pay the bills.

“Even if you’re part of a couple, it’s worth building your own pension wealth and not completely relying on your partner, not least because your circumstances could change. It’s important to plan ahead and check the situation if one of you passed away. Many final salary pensions will pay out only half the amount to a surviving spouse, and most people will receive only one state pension if their spouse passes away, although there are some exceptions for older couples who retired before April 2016. If you have a defined contribution pension, where you build up a pension pot, you’re allowed to pass it on completely free from inheritance tax, but you’ll need to fill in a form with your pension provider specifying what you want to happen to your pension.

Alice’s tips for building up retirement wealth as a single person:

  • Make sure you join your workplace pension and consider paying in more than the minimum contributions levels, which often aren’t enough for a moderately comfortable retirement
  • Check your pension savings at least once a year to see if you’re on track for the retirement you want. Use an online pension calculator to see what kind of pension income you could expect and how much to save to get there
  • Think ahead about your retirement plans as they may affect the pension savings you need. Many of us want to retire earlier than the state pension age and may need to use private pension savings to bridge the gap until we reach the state pension age
  • Check your state pension forecast to see if you have a full entitlement. If you have gaps in your national insurance record, it may be worth paying voluntary contributions to increase your state pension, depending on your circumstances. Check the government website for more details.

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