The difference between living comfortably and the minimum is of course subjective. Some may find that £12,800 is perfectly adequate for their retirement needs. The Pensions Policy Institute predicts that households owning their homes on retirement could fall from 78% to 63% by 2041 (source: The Actuary), so the possibility of relying on being a homeowner to bolster pension funds in later life for some is not an option. In fact the International Longevity Centre UK warns of a fault line opening beneath the UK pensions system, that could pose a risk to more than a million pensioner households in the 2040s. Discover about your pension.
What is a comfortable retirement amount for your pension?
These are facts that are independent concerns for the retirement / later life market. And there is no time like the present to address how you prepare for retirement and use of your pensions. But what is your level of comfort? How much do you need to live comfortably?
In the first instance we always advise seeking independent advice on your personal circumstances. As with everything to do with financial planning there is no one size fits all.
The common sense questions we must always be asking ourselves:
- What do I need to live in retirement?
- What are my options?
- How do I want to live in later life?
- What does comfortable mean to you?u
| Retirement Living Standards | One Person | Couple | ||
| Comfortable | 2021 | £33,600 | £49,700 | |
| 2022 | £37,300 | £54,500 | ||
| Moderate | 2021 | £20,800 | £30,600 | |
| 2022 | £23,300 | £34,000 | ||
| Minimum | 2021 | £10,900 | £16,700 | |
| 2022 | £12,800 | £19,900 | ||
Source Retirement Living Standards 12/01/2023
All these factors and more are prompting early access to pension with more than 1 in 10 over-55 homeowners dipping into that pot of money to support themselves. The number of people at retirement age has increased by 1.4 million in the last 5 years across the UK meaning more people than ever are in the pension bracket – and we are all living longer meaning that number is set to rise.
Tip: Make sure you have all the details of any pensions you have had previously. These include workplace or personal pension schemes. You can begin tracking them down by using the free Government Service.
Supplement your retirement income
Other ways of increasing retirement income is to:
- Downsize
- Rent out a room in your house
- Continue earning
- Releasing Equity from your property
There are products and plans that can help create security and peace of mind for people in later life.
Income from property holds huge untapped potential – on average a homeowner from the UK can unlock around £63,238 from their home (Q3 2023 equity release market statistics – Source Equity Release Council).
Some of these plans can even: –
- Include rolled up interest rates so there is nothing to pay as you go
- Set up as a tax-free pot you dip in to as and when you want to use it
- Payment plans allowing you to pay some or all the interest or repay some of the capital
It is important to point out that Equity release is a loan secured against your home. To understand the features and risks of equity release, ask for a personalised illustration. If you are thinking of consolidating existing borrowing you should be aware that you may be extending the terms of the debt and increasing the total amount you repay.
For balance, downsizing can release equity from your home. The amount of which depends on the value of the property, outstanding liabilities, such as mortgage and any charges. However that comes with the pitfalls of finding somewhere else to live and adjusting to a new lifestyle.
Important to note
- A lifetime mortgage is a loan secured against your home and subject to compound interest, meaning the amount you owe can grow quickly
- Equity release will reduce the value of your estate
- Equity release may leave you with limited or no property equity remaining
- Equity release may affect your entitlement to means-tested benefits
- Equity release will reduce your financial options in the future
How Retirement Solutions can help
Our advisers have over 300 different product options to recommend from.
You can find out more information on the different types of Equity Release here. Alternatively, you can book an appointment or call freephone 0800 043 0725. We will be able to discuss the benifits and risks involved with the options available.
Figures sourced from ‘Just retirement – press article – bank of mum and dad risk future care costs’
