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Ever wonder how your income compares to other people in retirement, or what you need to be aiming for? The Family Resources Survey data from the Department for Work and Pensions lets us take a deep dive into how much income pensioners get each week and where they get that income from.
As you approach retirement age, the data can still help you work out what you’ll need from your pensions and savings when the time comes and help you see if you’re on track.
The average post tax pensioner weekly income was £455 a week across all pensioners in the last tax year, equivalent to £23,660 per annum. Average incomes have also remained steady since 2022, rising from £443 per week to the £455 figure, when adjusted for 2024/25 prices.
This is a median income after housing costs, so tells us how much people might have available to spend each week on average. The housing picture could change over time, but currently there are very few people in this cohort who are paying private rent or contributing to a mortgage, so this gives us the best picture of disposable incomes.
What makes up this income?
Nearly half of pensioner couples receive more than half of their gross income from private sources, compared to 26% of single pensioners, showing a greater reliance on the state pension for single Brits.
The state pension, together with other benefits now make up over half (58%) of the income of the average single pensioner. For the poorest fifth of pensioners, this surges to 88%, or 79% in a couple. For the wealthiest tranche, it makes up 29% for single pensioners and 17% for couples, where unsurprisingly, the vast majority of their income comes from workplace and private pensions, plus their own savings and investments.
Although current pensioners will have built up most of their record under the old system, since 2016 the state pension has moved away from a basic rate pension and earnings-related top ups to a flat rate state pension. It’s clear from the data above that it provides a vital underpinning to secure incomes in retirement. Estimates vary, but to replicate the full, flat rate state pension together with inflation protection would require a pension pot of around £250,000.
Percentage of income from different sources for pensioners with the top and bottom incomes
What standard of living could I get in retirement?
The net income figures in this data set are worked out after housing costs, just like the figures produced by Pensions UK on the cost of typical living standards in retirement.
According to estimates from the industry body, Pensions UK, a single retiree is expected to need an income of £31,700 each year for a moderate lifestyle, and £43,900 each year for a comfortable lifestyle. Those in couples who can club together might need £60,600 between them at the top end, falling to £43,900 for a more ‘moderate’ lifestyle.
Although a basic minimum lifestyle is easily covered by the current average pension income figure, it’s striking to see how far it is from the moderate and comfortable standards.
When it comes to your own plans, it’s important to remember that the standards are just a rough guide to how much different retirement lifestyles might cost. If you’re approaching retirement, it’s worth delving into the figures to see if they paint a realistic picture of your needs, or if you can build your own estimate.
Take holiday spending for example; the comfortable living standard budgets for a fortnight four-star holiday in the Mediterranean with spending money and three long weekend breaks in the UK. This might look more like what you have in mind compared to the moderate living standard, which assumes a fortnight three-star all-inclusive holiday in the Mediterranean and a long weekend break in the UK.
Once you’ve got an income figure in mind, it’s useful to turn this into a pot value to see if your current savings are on track. If we go back to the ‘moderate’ lifestyle income of £31,700. After deducting the current full new state pension and allowing for tax, you’d need between £350,000 and £500,000 saved into a pension at state pension age, depending on how you decide to withdraw from your pension. The higher end would help you to retire earlier, or a lower figure could work if you intend to rely on other investments such as ISAs to support you in retirement.
A reminder – the state pension age is going up
The state pension age is now 67 for anyone born on or after 6 March 1961, and people born between 6 April 1960 and this date, are currently part of a phased increase from 66 to 67.
A further rise to 68 for those born from April 1977 onwards was also due from 6 April 2044, but this is currently included as part of a wider report into what the state pension age should be. Once the government has assessed the research its commissioned, it should be able to begin the formal review. However, that doesn’t necessarily mean we will get a quick decision on what might happen, and the timetable.
Charlene Young: Senior Pensions and Savings Expert
Charlene Young is AJ Bell’s Senior Pensions and Savings Expert. She joined AJ Bell in 2014 from a wealth management firm where she worked with private clients and small businesses as a financial planner.
Charlene...
