The Living Wage Foundation (LWF), known for promoting fair wages, has extended its concern to the realm of retirement. As the cost of living rises and more people are struggling to save, ensuring a decent pension for a comfortable retirement becomes increasingly important.
There is a growing awareness that many people, especially those on lower incomes, are falling far short of this goal. LWF's "living pension" campaign is designed to raise awareness among employers, encouraging them to contribute more generously to their workers' pension schemes and ensuring that pension contributions are based on real living wage calculations, rather than minimum wage assumptions.
The Living Wage foundation reports that "Average” pension pot needed to meet basic needs in retirement surges by 60 per cent in the cost-of-living crisis, from around £70,000 in 2020-21 to nearly £110,000 in 2023-24.
A worker on the real Living Wage needs to be saving around £2,800, or 12 per cent of their salary per year on average, to build a pension pot of this size.
The increase was driven primarily by the cost-of-living crisis which has pushed up the cost of securing an adequate income in retirement significantly.
The Living Wage Foundation commissioned the research to calculate the ‘Living Pension’ savings rate needed for a worker to be able to meet basic needs in retirement. The research found that on average a retiree needs an income of £19,300 a year to achieve a basic standard of living.
However, depending on relationship status and housing tenure, this varies from £13,500 to £28,400. A single home owning pensioner would need £258 a week/£13,500 annually and pensioner couples that own their own home would need £395 a week/£20,600 annually.
However, those who don’t own their own home will need a substantially higher income: single pensioners who live in the private rented sector would need an additional £6,900 a year compared to a homeowner to achieve an acceptable standard of living.
When averaged out across the different factors, the researchers calculated that the average pension pot size needed in addition to a full state pension to achieve an annual income of £19,300 in retirement is £107,800 for 2023-24.
The amount a worker on the real Living Wage needs to save to build up a pension pot of this size will vary depending on how many hours they work, how many years they work, the age they start saving at and their level of pay.
In conclusion, the Living Wage Foundation advocates for pension savings that allow for a dignified retirement, and this requires a significantly sized pension pot. Their focus on a “living pension” highlights the gap between current savings practices and the real cost of a secure retirement, pushing for reform that will benefit future generations.
