information

We use cookies to give you the best possible experience online. By continuing to use our website, you agree to receiving our cookies on your web browser. Visit our cookie policy page to find out more and how to change your cookie settings.

skip to main content

Catch up with the latest press releases from LV=

Large green heart

The cost of a happy retirement

Press release: 12/12/2013

£225,000: that’s the minimum needed to fund a contented retirement in the UK

  • Over a typical 17 year retirement ‘happiness’ will cost at least £225,756
  • Maximum state pension pays out £5,727 a year
  • Over 300,000 60 – 65s have no retirement savings and face a £106,000 income gap

Picture the scene: a detached house with a garden in a village, 21 days abroad on holiday a year, 468 hours spent on your favourite hobby and 364 hours of precious time with the grandchildren each year. They’re just some of the essential ingredients required for a ‘happy’ retirement in the UK – a lifestyle that costs a not insignificant £225,756 [1].

That’s according to new research[2] released today from retirement specialist LV=, which paints a very clear picture of what Britons on the cusp of retirement deem necessary for a contented life after work.

After conducting a survey of 1,070 adults aged 60-65 years, researchers from LV= set about compiling the definitive ‘blueprint’ for a happy retirement, drawing in the ideal property to holidays abroad, family time and everything in between.

The Essential Ingredients Of A Happy Retirement (costs per person):

  • To spend an average of £752 on holidays abroad each year
  • To spend at least 364 hours per year with children and grandchildren and £249 on gifts for them
  • To spend 312 hours and £1,716 per year socialising with friends
  • To spend 468 hours and £480 per year indulging their hobbies
  • To retire at the age of 65
  • To live in a detached house with a garden
  • To live in a village
  • Have good transport links and be within walking distance of local amenities
  • To live no more than 24 miles away from their children and grandchildren

Assuming they don’t need additional capital to move to their ideal retirement location, when coupled with the typical £7,623 essential annual living costs of a retired person in Britain today[3], the total cost of the contented retirement comes in at £10,820 per year. That’s £225,756 in total over the course of an average 17-year retirement[4].

Although this may seem like a fairly ordinary standard of living, 8% of 60 to 65s admit they have no form of pension or retirement funds in place whatsoever. This means that an estimated 315,200 people[5] will be relying on nothing but the state pension of £110.15 per week, or £5,727.80 a year in retirement. With a happy retirement costing at least £10,820 per year or £208.08 per week, this group of people will find themselves falling short in their pursuit of happiness by £5,092 in their first year and £106,243 over the course of their retirement[6].

Of those 60-65s who do have a pension, over a quarter (27 per cent) don’t know the value of their current pension pot. Industry figures show that a third (29.7%) of people have a pension pot of less than £10,000[7]. However, given that half (49%) of those who are still to retire haven’t sought any form of financial advice, the true shortfall in their pension will not become apparent until they are ready to retire.

Commenting on the findings, Vanessa Owen, LV= Head of Annuities and Equity Release, said: “It’s clear from the research that Britain has fairly modest aspirations when it comes to what they feel they need for a happy retirement. And indeed many of the features of a happy retirement, such as time with family and friends, cost no money at all.”

“However, one cannot shy away from the fact that achieving contentment in retirement, as with any lifestyle, does come with a price tag; over two hundred thousand pounds according to the research. It’s never too late to make a difference, but it’s important that people plan for the retirement as soon as possible and also explore all of the options available to them as retirement approaches, so they can maximise their income once their working lives come to an end.”

Indeed while the blueprint lists the basic costs and features required for a happy retirement, there are many among the over 60s who feel they need far more than what the blueprint offers to achieve contentment in retirement. One in three (33%) would not be contented unless they holidayed for over a month every year, and a further a third (37%) admitting they could not achieve happiness in retirement unless they were able to spend over £1,000. In fact, only 5% of all 60 – 65s would be happy in retirement without any holidays.

When it comes to socialising, 6% are planning a very frugal retirement and do not intend on spending any money, at the other end of the spectrum, 8% believe they would need to spend over £4,500 per year[8] wining and dining with friends to achieve happiness.

Vanessa Owen, LV= Head of Annuities and Equity Release, continued: “With people spending longer in retirement one of the challenges is looking at how they fund it. Today’s retirees now have many options available to them at the point of retirement and its important they make the best possible choice, as it will impact them for years to come. Seeking professional advice can put them on the path to a retirement where they have both the buying power and quality of life they desire.”


Notes to editors

  • £225,756 calculated by adding the costs of the ‘essential ingredients of a happy retirement’ of £3,197 to the cost of the annual essential expenditure of a single retired person, £7,623.20[3], to give £10,820.20. This is then accumulated over 17 years, the average length of retirement, allowing for 2.5% annual inflation [4].
  • Research conducted by Opinium on behalf of LV= in November 2013. 1,070 people aged between 60 and 65 who had not yet retired were polled.
  • According to the Office For National Statistics Family Spending Survey the essential weekly household expenditure of a single retired person is £146.60 per week. Over the course of 52 weeks this equates to £7,623.20.

Essential weekly living costs

Average weekly expenditure

Average retiree weekly expenditure:
One-adult retired household

Average retiree weekly expenditure
Two-adults retired household

Clothing & footwear

£7.80

£12.90

Communication

£5.20

£7.20

Food & non-alcoholic drinks

£27.10

£46.20

Health

£3.60

£7.10

Household goods & services

£13.40

£21.90

Housing: Net rent

£5.90

£6.60

Housing: Maintenance and repair of dwelling

£4.30

£4.80

Housing: Water supply and miscellaneous services

£4.70

£5.20

Housing: Electricity, gas and other fuels

£13.00

£14.50

Housing: mortgage interest payments, council tax etc.

£13.20

£14.80

Miscellaneous goods & services

£15.60

£27.40

Other expenditure items

£9.40

£6.80

Transport

£23.40

£68.60

Total Expenditure

£146.60

£244.00

4. According to the Office For National Statistics the average age at which people in the UK retire is 64. Additionally, the average life expectancy of a British adult today is 81. We can therefore estimate that the average length of a retirement is 17 years.

5. According to the Office For National Statistics Census 2011 there are approximately 3.94 million people aged between 60 and 65. 8 per cent of 3.94 million is 315,200.

6. Allowing for annual inflation of 2.5%, an income gap that starts at £5,092 in the first year will total £106,243 over a 17 year period.

7. According to 2012 ABI/Mintel research

8. 8% said they'd want to spend £76 or more socialising each week and the mean spend came out at £87. Multiplied by 52 (weeks in a year) this equals £4,524.