Rising cost of retirement

As retirement approaches, the rising cost of living necessitates a re-evaluation of your financial plans to ensure you can maintain your desired standard of living.

For most of our clients, this means a comprehensive strategy that aligns with your lifestyle goals while accounting for inflation and other economic challenges.

Understanding the rising cost of retirement

Recent data from the Pensions and Lifetime Savings Association (PLSA)[1] indicates a significant increase in the cost of retirement. The updated figures show that: –

  • A ‘basic’ lifestyle in retirement requires more funds than initially anticipated.
  • The cost of a ‘moderate’ retirement has surged by £8,000, reaching £31,300 per year for an individual.
  • Couples aiming for a ‘comfortable’ retirement are looking at a combined cost of £59,000 a year.

These increases are driven by climbing food prices, energy costs, and the growing desire to travel more or socialise with family and friends post-pandemic. Naturally, those aspiring for a luxury retirement will also face higher costs.

Maximising your pension and other income streams

Pensions can be a primary source of income in retirement, and they often play a crucial role in many financial plans.

The added tax relief available on contributions at your marginal rate of tax means that pensions remain one of the best ways to grow wealth over time, especially for those accumulating whilst in the higher or additional rate tax bracket.

In addition, individuals qualifying for the full state pension (with 35 years of National Insurance contributions) will receive £11,502 annually. This additional income can significantly contribute to achieving your retirement goals.

There is still time to top up missing years all the way back to 2006, but this now extended deadline expires in April 2025.

Tools for planning a luxury retirement

  1. Start early: Someone saving £500 per month over a 30 year period, with 5% annual compound growth would have a sum of nearly £400,000 by the end. Delaying the start date by 10 years, would mean they would need to invest double this to achieve the same end value.
  2. Utilise tax wrappers: Building wealth in various tax wrappers can maximise your options for a tax-efficient income in retirement. This involves taking advantage of ISAs, pensions, and other investment vehicles to reduce or eliminate tax on your capital growth.
  3. Focus on your investment strategy: Ensure your portfolio is diversified but has enough equities to drive capital growth while accumulating wealth. For those with many years before retirement, you have time to weather market downturns and achieve substantial growth.
  4. Cashflow modelling: This tool used by financial planners can help project future financial scenarios and to understand the impact of rising costs on your retirement plans. It can help determine how much and where you should be saving today, in order to reduce the chance of running out of money in later life.

The importance of regular financial reviews

With the rising cost of living and fluctuating economic landscapes, it’s critical to have regular reviews of your retirement plan.

A financial planner can help ensure you’re on track to meet your goals, advising on necessary adjustments to your contributions and investment strategy.

Achieving financial freedom in retirement

Whether your retirement dreams involve luxury travel or quality time with family, meticulous planning is key to achieving financial freedom. Discuss your goals with your professional advisory team to create a realistic and adaptable retirement plan. By proactively managing your finances and accounting for the rising costs of retirement, you can secure a comfortable and fulfilling future without financial worries.

To determine your lifestyle in retirement and start planning ahead now, you can contact our team of professional financial planners.


[1] Retirement Living Standards – Picture your future – 2024
The information contained within this website is subject to the UK regulatory regime and is therefore primarily targeted at consumers based in the UK.
Past Performance is no guarantee of future performance. The value of an investment and the income from it can fall as well as rise and investors may get back less than they invested. Your capital is therefore always at risk.
This communication does not constitute financial advice. Individuals must not rely on this information to make a financial or investment decision. Before making any decision, we recommend you consult your financial planner to take into account your particular investment objectives, financial situation and individual needs.
The opinions stated in this document are those of the author and do not necessarily represent the view of Progeny and should not be relied upon to make a financial decision.
Tax treatment depends upon individual circumstances and is based on current UK tax legislation that is subject to change at any time.

This article is distributed for educational purposes and should not be considered investment advice or an offer of any security for sale. This article contains the opinions of the author but not necessarily the Firm and does not represent a recommendation of any particular security, strategy or investment product. Information contained herein has been obtained from sources believed to be reliable but is not guaranteed.

Past performance is not indicative of future results and the value of investments can fall as well as rise. No representation is made that the stated results will be replicated.

Tom Parkes

Chartered Financial Planner

Having joined Progeny in early 2021, Tom has been working in the profession since 2009 and has extensive experience providing holistic advice to professionals, senior managers, business owners and retirees.

Learn more about Tom Parkes