A leading money expert has cautioned that many retirees may be underestimating the true cost of retirement, as the state pension is designed only to cover basic needs. Antonia Medlicott, Founder and Managing Director of Investing Insiders, explained that while individual circumstances vary, the state pension should not be relied upon for more than essentials.
Minimum Retirement Costs
According to the latest Retirement Living Standards report, a single person requires at least £13,400 per year for a ‘minimum’ retirement. This covers basic living expenses such as groceries, a free bus pass, and small luxuries like a TV licence. However, the full new state pension currently stands at £241.30 per week, or approximately £12,547.60 annually after the April rate increase. This leaves a shortfall of nearly £1,000 per year.
Moderate and Comfortable Lifestyles
For those aiming higher, Medlicott outlined the savings needed. A moderate lifestyle for a single person requires an annual income of around £31,700, rising to £43,900 for a couple. A comfortable lifestyle demands £43,900 for an individual and £60,600 for a couple. She noted that a general rule of thumb is to have a pension pot of about 10 times your annual salary before retirement to achieve a moderate to comfortable standard of living.
State Pension Shortfalls
As of 2023, only about half of eligible pensioners receive the full new state pension. Many receive less due to insufficient qualifying years—years in which they paid National Insurance, received credits, or bought voluntary contributions. With fewer than 35 qualifying years, the pension is reduced, with a minimum of around £68.90 per week for 10 years of contributions. Medlicott recommends using the Government’s pension calculator to check entitlements.
Additional Support via Pension Credit
Retirees on low incomes may qualify for Pension Credit, a means-tested benefit separate from the state pension. Singles with income below £238 per week and couples with joint income below £363.25 are eligible, with payments topping up income to these levels. Additional Pension Credit is available for those with certain circumstances, and recipients may also qualify for Council Tax reduction and Housing Benefit. Medlicott urged exploring all options, as Pension Credit is one of the most underclaimed benefits.
