Rules of thumb for retirement spending developed by the UK’s Pensions and Lifetime Savings Association (PLSA) now reflect the experience of lockdowns linked to the coronavirus pandemic, according to an announcement from the PLSA.
More money for eating out and personal grooming and a Netflix subscription are now included in the different basket of goods and services whose cost is reflected by the Retirement Living Standards.
First presented in 2019, these are designed to help people picture the lifestyle they want when they retire, and understand the cost. They are pitched at three different levels – minimum, moderate and comfortable.
The underlying baskets of goods and services are established by what the public considers realistic and relevant expectations for retirement living.
For the update announced today, researchers at Loughborough University held 13 discussion groups with members of the public from across the UK, including both retirees and those approaching retirement (55+).
The annual budget for the minimum standard has risen by £700 to £10,900 for a single person in 2021 and by £1,000 to £16,700 for a couple.
The annual budget for the moderate standard has risen since 2019 by £600 to £20,800 for a single person and by £1,500 to £30,600 for a couple.
The annual budget under the comfortable retirement living standard has increased since 2019 by £600 to £33,600 for one person and £2,200 to £49,700 for a couple.
“It is important that the Retirement Living Standards remain relevant by reflecting real world price changes and real world expectations about lifestyles in retirement,” said Nigel Peaple, PLSA’s director of policy and advocacy.
“The lockdowns caused by the pandemic have given many workers a foretaste of being retired and made people think about the activities and experiences they truly value. The pandemic has emphasised the importance of economic security as well as social and cultural participation in retirement.”
More about the update to the standards can be found here.
Hymans research shows a third of DB schemes likely to meet ‘Fast Track’ requirements
A third of defined benefit (DB) pension schemes (35%) are likely to meet The Pensions Regulator’s (TPR) Fast Track requirements, against an improving picture for scheme valuations, according to the latest benchmarking analysis from Hymans Robertson.
The research implies that pensions schemes’ funding has been relatively unscathed after last year’s initial disruption, but challenges remain, the consultancy warned.
Hymans’s research also revealed that nearly half (46%) of DB participating trustees thought they would experience regulator intervention before their next valuation.
Laura McLaren, partner at Hymans, said: “With the ongoing fallout from COVID-19, Brexit and numerous regulatory changes, the next round of recovery plans may highlight a more dispersed picture across schemes with sponsor covenant and affordability looking set to have the largest impacts.”
She noted that more regulatory change is coming with Fast Track compliance and this would have the potential to impact funding plans and push up cash requirements.
When DB trustees were questioned about TPR’s forthcoming consultation, nearly half (44%) said they would like more flexible Fast Track parameters, with 41% believing transitional arrangements would be helpful.
A further 43% said they wanted wider ‘Bespoke’ flexibility, while 41% also wanted barriers to ‘levelling down’ existing funding plans, the research disclosed.
“TPR’s latest scheme funding analysis highlights the good progress many schemes are making but the outlook remains uncertain. With markets managing to recover strongly after last year’s initial disruption pension schemes, on the whole, are emerging in a good position however for some there are likely to be longer lasting implications on sponsor covenant and affordability,” McLaren said.
She added that TPR’s analysis provided schemes with a good opportunity to benchmark their current funding plans.
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