Average costs mount up from spending on the basics such as food, clothes and utility bills while leaving limited spare cash for eating out and entertainment, according to finance company Key’s analysis of the latest government spending data.
The weekly bill of £225.50 per person needed to fund the basics amounts to 34 per cent more than the full basic state pension of £168.60 available for those who qualify, which the study said underlines the need for other sources of income in retirement.
The national average cost of retirement at £11,830 a year is just more than the Scottish figure.
However, the cost of retirement in the south east of England is nearly £4,000 a year more at £14,270 than in the West Midlands where the cost is £10,280.
Retired people in the south east and south west of England, London, East Anglia and the East Midlands all need to find more than the national average while the less expensive areas of the country include Wales, Northern Ireland and the West Midlands, which had the lowest level at just £197 a week, but still 17 per cent higher than the state pension income. Key’s analysis shows the two biggest weekly costs are utility bills – gas, electricity and water – and food, with each accounting for 20 per cent of spending. Each costs around £2,370 a year on average.
Transport, including the cost of running a car, eats up around 16 per cent of bills while spending on entertainment costs around 23 per cent of the typical outgoings during retirement.
Will Hale, chief executive at Key, said: “With retirees needing 35 per cent more than the full state pension provides, people need to think carefully about how they will bridge this gap.
“Workplace and private pensions as well as savings and investments can help but for most people maintaining a decent standard of living in retirement means maximising all sources of income.”
Workers now have to join a workplace pension scheme through the UK government’s 2012 automatic enrolment programme.
New regulations brought in last month saw the minimum amount workers could contribute raised from 8 per cent of income, to which employers must contribute at least 3 per cent, with the remainder being made up by staff. Previously the minimum figure was 5 per cent, with 2 per cent from employers and 3 per cent from staff.
In 2018, the state pension age for men and women was equalised at 65 and both genders will experience any future rise in tandem.