Revealed: How much do single people need to save for retirement?

There are a growing number of single people planning for or approaching retirement in the UK.

Whether you are single through choice or by circumstance, it’s important to be proactive in planning for your retirement. This is because a single person may need to save proportionally more for their retirement than people who are in a couple.

FTAdviser reports that single people may need to accumulate a larger pension pot than each person within a couple if they are to achieve their long-term financial goals.

The research was based on the Pensions and Lifetime Savings Association’s threshold for achieving a “minimum”, “moderate”, and “comfortable” standard of living in retirement.

According to the report, to achieve a minimum standard of living, covering all the basics, one holiday a year in the UK but no car, a single person would require an annual income of £12,800. To achieve the same, a couple would need an annual income of £19,900.

Assuming you receive a full State Pension worth £10,600 a year, the couple could achieve this standard of living without any additional retirement savings. A single person would need an annual income of £2,300 before tax on top of their State Pension.

It’s important to take these figures with a pinch of salt since they are broadly applicable and aren’t specific to you. What they can show you, though, is the importance of careful financial planning that is geared towards your personal circumstances and goals to ensure that you save enough to achieve your desired lifestyle in retirement.

5 practical steps you can take to build financial security if you’re single

Being single doesn’t need to be a disadvantage when it comes to building your financial security and achieving your long-term goals.

These five steps could help you to start working towards your long-term goals today, regardless of your relationship status.

1. Understand how much you may need to save to afford the retirement you want

Whether you are single or part of a couple, having an understanding of your income needs in retirement is vital if you’re to create an effective financial plan. As you’ve read above, though, single people may need to save more to be able to afford their preferred retirement lifestyle.

It’s important to be thorough and honest when thinking about the costs you may need to cover. As well as thinking about the lifestyle you’d like, consider how much you may need to save for potential later-life care costs.

As life expectancy increases, sadly more and more people are likely to require help with daily tasks as they age, such as washing, cooking, and cleaning.

In fact, Fidelity reports that three out of every four people are likely to need some form of care in later life. According to the report, 1 in 7 people may need to pay more than £100,000 for this care, while 1 in 10 may need over £120,000 to cover the cost.

So, make sure you are able to afford the care you may need later on by factoring it into your financial plan sooner rather than later.

2. Prioritise careful tax planning so that you can make the most of the allowances available to you

Couples can benefit from doubling up on tax allowances as well as having access to benefits not available to people who don’t have a spouse, such as the transferrable nil-rate band for Inheritance Tax.

Careful tax planning can enable you to make the most of the allowances available to you, helping to mitigate your tax bill so that you can put more of your income towards achieving your goals.

3. Write a will to make sure your assets pass to the people you have chosen after your death

Writing a will is an important part of estate planning for most people, but if you’re single it is especially important. This is because it allows you to decide how your assets will be distributed after you die.

If you die without a valid will in place, your estate will be divided up and distributed according to the laws of intestacy. This means that the following people could inherit some or all of your estate:

• Children
• Parents
• Siblings
• Nieces and nephews

If you have no surviving relatives after death and you did not leave a will, your estate passes to the Crown.

So, to ensure that your assets pass to the people of your choice after you die, it’s important to write a will and review or update it after significant milestones such as buying or selling property.

4. Protect your income

If you’re single, your income is even more important in maintaining your current standard of living while also saving for the future. If you were to fall ill and be unable to work for a period of time, this could damage your financial wellbeing both today and in the future.

This is because, as well as having to pay your bills and your mortgage, for example, you might also lose out on vital pension contributions. If this happens even for a short time, you could find yourself with a significant shortfall by the time you come to retire.

That’s why it’s vital to understand the risks that you could face and consider taking out appropriate financial protection. Policies such as income protection and critical illness cover could help you to mitigate the financial impact of being unable to work due to illness or injury.

5. Consult a financial planner for guidance and advice

According to a report by Money Marketing, people who are single or who don’t have children are less likely to seek professional advice about their finances than married couples.

The report shares that 44% of financial planning clients are married compared to just 11% who are single.

Working with a financial planner has many benefits, both financial and emotional. As well as helping you to improve your financial wellbeing, they can also provide valuable peace of mind that you will be able to cope with any financial challenges that arise throughout your life.

Get in touch

If you’d like to learn more about how we can help you to build your financial wellbeing and plan for the retirement you dream of, email us at info@harperlees.co.uk or call 01277 350560. We’ll be very happy to help.

Please note

This article is for information only. Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.

A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future performance.

The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates, and tax legislation may change in subsequent Finance Acts.

Note that life insurance plans typically have no cash in value at any time and cover will cease at the end of the term. If premiums stop, then cover will lapse.

Cover is subject to terms and conditions and may have exclusions. Definitions of illnesses vary from product provider and will be explained within the policy documentation.

The Financial Conduct Authority does not regulate estate planning, cashflow planning, tax planning or will writing.