Cost of living in retirement to 'rise 148% by 2050'

The cost of living in retirement is set to soar by nearly 150% by 2050, a report predicts.

A current pensioner who is not reliant on the state pension spends around £1,084 a month on everyday living costs such as housing, food, heating and transport - but by 2050 this is set to increase by 148% to £2,930 a month, according to calculations commissioned by pensions company Royal London.

The report, compiled by the Centre for Economics and Business Research (Cebr), found that in order to achieve a decent retirement income, someone who is 35 years old now will need to build up a fund of at least £666,000, not taking into account any state pension existing at that time.

The research also found that today's 30 to 40-year-olds have a long way to go to achieve this amount - as the average pot they have so far stands at £14,000.

Meanwhile, two-fifths (40%) of people aged under 40 predicted there will no longer be the extra financial cushion provided by the state pension by 2050.

Nearly two-thirds (60%) of 30 to 40-year-olds surveyed have a pension in place, with 27 being the average age at which they started saving. By comparison, people who are currently retired started pension saving at the age of 31 on average.

More than half (54%) of thirtysomethings who were not saving into a pension said the reason was that they could not afford to do so.

Fiona Tait, a pensions specialist at Royal London, said: "The scale of the challenge facing today's 18 to 40-year-olds to secure an adequate income for their retirement, potentially from 2050 and beyond, is quite frightening.

"Royal London research highlights the level of income that people should aim to secure for their retirement if they wish to be able to maintain a reasonable standard of living.

"However, it is very likely that future pensioner spending will be higher than this and so they need to start saving more now."

The Pensions Through the Ages report also found that the biggest single piece of financial advice that 65 to 75-year-olds would give those in their 30s is to start saving as soon as possible, with 27% saying this.

Around 17% of 65 to 75-year-olds said that they would tell the younger generation to start to think about the amount of income they may need in retirement.

A Department for Work and Pensions (DWP) spokeswoman said: "It's never too early for people to think about the standard of living they want in later life and consider whether they are putting enough by to achieve it.

"We know that many people are not saving enough to maintain their working age standard of living into retirement.

"That's why our radical reforms to make pension saving easier, clearer and cheaper are so crucial - and they are making a real difference in changing Britain's approach to long-term saving.

"While the state will always provide a decent safety net, most people wanting to maintain their standard of living into old age need to make their own provision too."