Set your own retirement living standard

Last week (3 Jun 2026) new Retirement Living Standards were released by Pensions UK.

In this article I’m going to cover:

In 2019 Pensions UK asked Loughborough University to research the cost of different standards of retirement living. The outcome was three figures representing minimum, moderate and comfortable retirement lifestyles. There are a few different versions covering individuals vs couples, and inside vs outside London.

There’s no perfect way to do this research or set of assumptions that would work for everyone. The research is transparent about its methodology and the assumptions that it makes. That’s as much as you can ask for from this research.

The purpose was to create a common language across the industry for how to talk about how much people need in retirement. No easy task, but they’ve been very successful.

The problem with that success is how the standards are now being used. Arguably they’re becoming a distraction rather than a help for improving people's retirement outcomes. Arguably you’d be better off ignoring them when it comes to your own planning.

Most people in the UK will fall somewhere between the minimum and moderate standards. This is to be expected given the median income for UK full-time workers is £39,039 (ONS, April 2025) and the moderate living standard isn’t that much less at £32,700.

Yet this has been sensationalised with headlines like:

It’s a pretty meaningless judgement. Somehow people are living pre-retirement on less than the moderate and comfortable retirement living standards. The cost of living crisis is both a ‘today problem’ and a ‘retirement problem’, but it’s not one that we need to artificially judge people for.

The problem with fear-based news is that it can trigger the Ostrich Effect. It is a cognitive bias that sees people avoid, ignore or delay anxiety-inducing information.

Most of the coverage I read failed to provide people with reassurance or practical options for changing their retirement outcomes.

The articles tend to imply you need a huge amount saved before retirement. None mention how much of that would come from investment growth both before and after retirement.

None mention that there are also retirement income options that don’t require saving more. Things like the additional benefits available for the worst off, equity release or part-time working. None are ideal, but all are pragmatic ways to make a significant difference to a retirement plan.

I’ve already mentioned that the Retirement Living Standards rely on quite a few assumptions. They’re not even averages. No financial adviser would use these for budgeting. So why would you as an individual?

To summarise the key points so far: the Retirement Living Standards have delivered arbitrary sensationalist headlines, likely to make people disengage from retirement planning despite the fact they’re not robust enough to be used in actual retirement planning.

So, what could you do instead?

The intention of the Retirement Living Standards is to provide a guideline for the cost of living in retirement. They’re based on pretty high-level research and come heavily caveated that everyone’s situation is different.

Here are 5 steps for setting a Personal Living Standard based on your current lifestyle. It will still just be a rough guideline, just one where the inputs are based on you and arbitrary judgements aren’t baked in.

First identify your current monthly spending.

If you’re a personal finance geek like me you probably already have a spreadsheet with your household monthly expenditures listed out.

If you use online banking or open banking apps you’ll likely have a screen available that lists your total monthly outgoings.

If you have no clue, then it’s too soon to be talking about your costs in retirement. Focus on understanding your current spending using one of the methods above.

Next you need to subtract the big current costs that you won’t have in retirement.

To bring this to life, let’s look at an example of a household whose current expenditure is £6,000 a month.

It’s a lot, but it includes some chunky costs that won’t be there in retirement like:

Those add up to £4,000.

So this household is looking at monthly costs of £6,000 - £4,000 = £2,000 to maintain their current lifestyle into retirement.

The figure from Step 2 can be turned into a total cost per year if it is multiplied by 12.

So continuing the example:

£2,000 (monthly non-retirement costs) x 12 = £24,000 a year

Next you’ll need to identify your one-off annual costs that will still apply in retirement.

These might be things like:

All we need to do now is bring the figures from Step 3 and Step 4 together to work out your Personal Living Standard.

Your Personal Living Standard = Annual regular costs + Annual one-off costs

So for this example:

£24,000 + £5,000 = £29,000 annual living standard

Well done if you’ve endured the maths, particularly if you’ve had to work out your spending from scratch. Next I’m going to cover why this calculation is useful.

First it’s important to note that this is still a general guideline. This isn’t intended to replace detailed financial planning, just provide a quick, more meaningful and actionable alternative to the generic Retirement Living Standards.

You can use a similar process to work out a detailed retirement budget, but today’s aim is just to showcase a useful alternative to the Retirement Living Standards. It's beneficial in three ways:

Starting your retirement thinking with your Personal Living Standard means that the numbers are more relevant to your lifestyle and all the individual decisions you make about your money rather than the generic assumptions made by researchers.

Rather than judging yourself against arbitrary standards you are comparing yourself against your current lifestyle.

If you don’t like it, you get to change it by changing your current lifestyle today. The connection between present and future living standards is typically overlooked.

Whether you’re looking at a high or low cost of living, your happiness in retirement will be closely linked to the size of the gap between your current lifestyle and your retirement lifestyle.

Choosing your spending wisely now is a proactive action. It means you are taking control of your finances. It’s psychologically positive.

Being forced into a big drop in living standard and tough spending choices in retirement is disempowering and psychologically negative.

A lot of the coverage about the Retirement Living Standards uses calculations to estimate the total cost of retirement. The aim is to help people compare what they’ll need to spend vs their current savings or other retirement provisions.

So to continue the example from above:

£29,000 (Personal Living Standard) - £25,095 (2x Full State Pensions) = £3,905

That's the amount your need to cover a year. Multiplied by 30 years = £117,150

Remember the amount you need to spend in retirement is generally more than the amount you need saved at the point of retirement. This is because you will have investment growth over a 30-year retirement and there are other ways of funding eg part-time working or equity release.

The figure is probably still large. You’ll still need to think about how to get close and manage that gap between your pre-and post retirement lifestyle. However, hopefully this approach produced a less scary number and one more grounded in your personal situation.