The latest Retirement Living Standards (RLS) update from Pensions UK has highlighted the scale of the retirement savings challenge facing UK workers, as the Pensions Commission considers whether minimum automatic enrolment contribution rates should rise in future.

The annual standards, calculated by the Centre for Research in Social Policy at Loughborough University, show that a minimum retirement lifestyle now costs £13,900 (€16,000) a year for a single-person household and £22,500 for a two-person household. A ‘moderate’ lifestyle costs £32,700 and £45,400, respectively, while a ‘comfortable’ lifestyle costs £45,400 for one person and £62,700 for two.

The figures reflect higher day-to-day costs across categories, including food, household bills, transport, social activities and hobbies.

Pensions UK estimates that around 82% of the working population is on track to achieve the minimum retirement living standard. However, only 23% are expected to reach a ‘moderate’ standard and 9% a ‘comfortable’ standard.

The association said this is “out of step” with the retirement outcomes many people expect and warned that, without higher levels of saving, many risk a significant drop in income when they stop working.

The findings come as the Pensions Commission reviews the future of retirement adequacy, including whether minimum saving rates under automatic enrolment should increase. The commission’s final report is not expected until next year, while the government has ruled out raising automatic enrolment contribution levels during the current parliament.

In the meantime, Pensions UK said the retirement living standards can help individuals assess the retirement they want and consider increasing their pension contributions where possible.

It also called on employers to help address the savings gap by keeping workers enrolled in pension schemes and offering matching contributions above statutory minimum levels where feasible.

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