Retirement Income Increases 98% In 30 Years - But Is Still Half Of Recommended Sum

It may not be news to anyone that the average person retiring in 2023 - or planning on retiring in the near future - will require a far heftier pension pot than previous generations required.

What may surprise you, however, is just how much the amount needed in order to retire comfortably has increased in the past 30 years. Our experts at Moneyzine.com have combed through data to find the average annual income for a retired person in 1995, 2010, and 2022 and compared it with the amount needed to retire comfortably in 2023.

Average Retirement Income Has Increased by 98% in Almost 30 Years

Moneyzine.com discovered that the average annual pension income has increased by approximately 98% from £9,152 in 1995 to £18,138 in 2022. This means that over this time period, the average pension income has nearly doubled, which is a significant increase. However, this isn’t quite the positive that it may seem…

If we factor in inflation, £9,152 in 1995 is equivalent in purchasing power to about £21,697.10 today.

That can allow us to conclude to very key points:

1. The average retirement income in 2023 is actually less than it was 30 years ago if we factor inflation into the equation. Meaning that individuals now are saving less successfully towards their retirements than they were in the 1990s.

2. While the average retirement income may have increased by 98% in the last 30 years, it is almost half of what is ‘recommended’ for a comfortable retirement. As we detail below, the recommended annual sum for a comfortable retirement is, in fact, £37,300.

Average pensioner income:

1995: £176 weekly | £9152 annually

2010: £335 weekly | £17,420 annually

2022: £349 weekly | £18,138 annually

How Much Is Needed to Retire in 2023?

You’ll find a medley of different figures surrounding the average UK pension pot, what’s needed to retire, and how much an individual should be aiming for to retire comfortably in the UK.

We’ve used figures from Retirement Living Standards (RLS), which are released annually and based on independent research from Loughborough University.

RLS estimated that, in 2023, the average single person needs an annual income of £37,300 per year to live comfortably. To secure a yearly income of £37,300, a single retiree would need a pension pot of £530,000.

However, it also provides the following estimates based on the type of lifestyle a retiree might have:

• Minimum needed: £12,800

• Moderate: £23,300

• Comfortable: £37,300

What does that mean? Essentially, in 2023, an individual should be aiming for an annual retirement income of £37,300 in order to not be living in poverty in their retirement.

How Much Would Someone Need To Save For Comfortable Retirement?

This table shows the annual and monthly savings needed for individuals of different ages to accumulate the additional income required to reach a desired annual retirement income of £37,300, factoring in a 6% annual return and the assumption that the state pension remains at £10,600 annually.

Variables To Take Into Account

Ageing Population

Between 2002 and 2012, the population aged 65 and over increased by 15%. Between 2012 and 2022, the growth in the population of retired individuals (65 and over) was estimated to have accelerated to a staggering 22%.

That means a significantly larger proportion of individuals are of retirement age in 2023 than there were 30 years ago, putting more strain on the social infrastructure needed to support an ageing population.

Life Expectancy

In 1995, the average life expectancy for men in England was 74.2, while for women it was 79.4. Now, that figure has risen to 87.3 years for men, and 90.2 years for women.

That means that not only do retiring individuals need almost double the annual retirement income needed 30 years ago, but they also need to factor in a longer life expectancy into retirement planning. For example, a man retiring at age 65 in 1995 would have an average of 10 ‘retired’ years - now, in 2023, that number has more than doubled.

“With the cost of living skyrocketing in recent years, many individuals approaching retirement age are faced with the critical need to amass far more retirement savings than was necessary in the past.

Beyond that, the rising life expectancy and growing ageing population once more brings the conversation regarding provisions for the elderly - and what can be done to ensure millions of pensioners are not living in poverty in the future.”

Jonathan Merry, personal finance expert at Moneyzine.com