Minimum retirement costs fall due to lower energy bills and public expectations

A fall in energy prices and changes in public expectations have lowered the minimum amount retirees need per year. A single person needs a minimum of £13,400 per year to retire in 2025, according to the latest figures by the Pensions and Lifetime Savings Association. The figure represents a £1,000 decrease compared to last year's minimum required figure of £14,400 per year. Those in a two-person household need a minimum of £21,600 per year to retire now, down from £22,400 in 2024.

The changes are largely due to the fall in energy costs, however, changes in the public's expectations of what retirement looks like have driven costs down too. Those hoping to retire on a minimum income now expect to spend less on clothing, hairdressing, technology purchases, taxis, and charity than their predecessors.

Professor Matt Padley, Co-director of the Centre for Research in Social Policy at Loughborough University, said; “Our research on what the public agree is needed in retirement at these three different levels continues to track changes in expectations, shaped by the broader economic, social and political context. The consequences of the cost-of-living challenges over the past few years are still being felt, and we’ve seen some subtle changes in public consensus about minimum living standards in retirement, resulting in a small fall in the expenditure needed to reach this standard.

Importantly, the lower costs to retire only apply to those hoping for a minimal retirement. Those expecting to retire with moderate or comfortable levels of expenditure will see their retirement costs rise slightly in 2025. A two-person household hoping for a comfortable retirement outside of London will now need £60,600 a year to live comfortably. This is up from £59,000 last year.

We explore the exact amounts required to retire as well as what they entail below.

How much do you need to retire in 2025?

There are three PLSA retirement standards: minimum, moderate, and comfortable. Each standard comes with its own estimated expenditure, which we've outlined below.

The figures below are based on calculations by the Centre for Research in Social Policy at Loughborough University on behalf of the PLSA. These figures assume you own your home outright, meaning that you don't pay rent or a mortgage.

Also, these numbers are not inclusive of income tax or other taxes you may owe on your income. They are expenditure figures rather than the total income required.

	Annual expenditure of a one-person household in 2025	Annual expenditure of a two-person household in 2025
Minimum	£13,400 (down from £14,400 in 2024)	£21,600 (down from £22,400 in 2024)
Moderate	£31,900 (up from £31,300 in 2024)	£43,900 (up from £43,100 in 2024)
Comfortable	£43,900 (up from £43,100 in 2024)	£60,600 (up from £59,000 in 2024)

If you choose to live in London when you retire, the figures will be higher. For example, a single person living in London will need £15,800 for a minimum retirement, while a two-person household will need a minimum of £24,800. On the other end of the spectrum, a two-person household living in London will need £62,700 for a comfortable retirement, around £2,000 more than the same household living outside of London.

It's worth keeping in mind that the figures are inclusive of the state pension. This is not the amount you'll need for retirement on top of the state pension. It's the total amount you'll need, inclusive of any pensions and benefits you're entitled to. In 2025/2026, the full State Pension is £230.25 per week, which is equivalent to £11,973 per year.

Around 70% of people retire as part of a two-person household. Two people in receipt of the full state pension would meet the minimum expenditure required to retire if they live outside of London as they would have nearly £24,000 between them which is around £2,400 more than they would need for a frugal retirement based on the latest PLSA figures.

Below, we explain what is meant by a minimum, moderate and comfortable retirement to help you decide which level would be appropriate for you and your needs.

What is a minimum retirement?

The minimum retirement standard covers your basic needs as well as a little discretionary spending for fun. With the minimum standard, the PLSA has accounted for:

• House-related bills as well as £200 a year for DIY projects
• Approximately £55 a week for a food shop, a monthly meal out and a monthly takeaway
• £30 per month for taxi journeys and £180 a year for train journeys with a senior rail card (but no car)
• A one week, half-board holiday in the UK and an extra £20 a week for leisure activities
• Approximately £450 on clothes and shoes, plus an allowance for personal grooming and NHS dentists

These are examples of the types of things you should be able to afford on a minimum retirement, but the list is not exhaustive.

What is a moderate retirement?

The moderate retirement standard covers your basic needs but provides more financial flexibility and a few extra luxuries compared to the minimum standard. With the moderate standard, the PLSA has accounted for:

• House-related bills as well as £800 a year for home improvement projects
• A weekly takeaway and meal out and around £56 per week for the food shop
• One car per household plus £22 per month for taxis and around £100 to cover train journeys
• A 14-night all inclusive holiday abroad in a 3* hotel each year and a long weekend in the UK plus leisure activities totalling £43 per week
• Approximately £1,550 on clothes and footwear, plus a larger allowance for personal grooming and NHS dental care

What is a comfortable retirement?

The comfortable retirement standard covers all your basic needs and provides even more luxuries and larger allowances compared to the minimum and moderate standard. With the comfortable standard, the PLSA has accounted for:

• House related bills as well as £900 a year for home improvement projects and some allowance for weekly lawn cutting and occasional deep cleaning and gardening projects
• A more expensive weekly meal out and takeaway as well as around £75 per week for a food shop
• One small car per household plus £22 a month for taxi journeys and £200 a year for train journeys
• A 14-night all inclusive holiday abroad in a 4* hotel each year and three long weekends in the UK plus leisure activities, totalling £54 per week
• Approximately £1,550 on clothes and footwear, plus a larger allowance for personal grooming and NHS dental care

How to use the PLSA standards to plan for retirement

The PLSA standards aren't designed to be overly prescriptive, but rather to give you an idea of the kind of expenditure you can expect depending on what you want out of your retirement. The guidance suggests a pick and mix option might work best to work out what would suit you best in retirement depending on your own needs. So, for instance, you might not want to travel abroad when you retire but you may wish to have a car and eat out once a week.

Zoe Alexander, Director of Policy and Advocacy at the Pensions and Lifetime Savings Association, added: “For many, retirement is about maintaining the life they already have not living more extravagantly or cutting back to the bare essentials. The Standards are designed to help people picture that future and plan in a way that works for them.”

You may not fit neatly into any one of the categories, but they're designed as a starting point to help you plan your retirement income target based on your own circumstances and priorities. The PLSA has a number of case studies that explore how the numbers might look different depending on your personal and professional situation in life.

How big does your pension pot need to be to retire in 2025?

The table below is based on the PLSA's calculations for the total pension pot you'll need if you plan to retire using the minimum, moderate, or comfortable levels of expenditure outside of London. The total pension pot needed assumes you will also have a full state pension and that you're planning on purchasing an annuity.

Retirement Living Standard	Two-person household - total pension pot per person	One-person household - total pension pot
Minimum	£0 (the state pension will cover your expenditure)	£20,000 to £30,000
Moderate	£165,000 to £250,000	£330,000 to £490,000
Comfortable	£300,000 to £460,000	£540,000 to £800,000

Annuity rates change regularly, so this is just an illustration. Similarly, if you're looking at drawdown options instead of an annuity (or perhaps a combination), your figures may be different.

Saving for retirement in 2025

Having a target annual expenditure in mind makes it easier to work out how much you need to save for retirement. Engaging in pension planning and working out how much you need to save will put you ahead of 82% of people who don't know how much they'll need to maintain their current standard of living in retirement. Once you have a figure in mind, you can start taking steps towards reaching that figure.

If you're currently employed, you're likely paying National Insurance towards your state pension and you're probably auto-enrolled into a workplace pension. Automatic enrollment means you will contribute a minimum of 8% of your income towards your pension. If you've opted out of the workplace pension, you may want to think about whether it's worth rejoining, as your employer has to contribute a minimum of 3% to your pension on top of your contribution. Not being auto-enrolled if you're eligible is essentially leaving money on the table.

Zoe Alexander, Director of Policy and Advocacy at the Pensions and Lifetime Savings Association, added: “Automatic enrolment sets pension contributions at 8%, which is a solid starting point - especially if you begin early. But for many, saving 12% or more offers a better chance of reaching the retirement they expect. While defaults may rise in the future, it’s important for savers to consider whether 8% will be enough for their goals.

“Everyone’s situation is different, and contributions should be manageable. But if your circumstances improve, even small increases can make a big difference to your future." 

If you're not eligible for auto-enrollment or if you're self-employed, you might want to think about setting up your own pension. We discuss two possible options in our article comparing the merits of personal pensions versus a self invested personal pension (SIPP). Whether you're auto-enrolled or have your own SIPP, you will receive tax relief on top of your contributions from the government making it easier to build your pension over time. If you decide to opt for a SIPP in addition to your other arrangements, check out our article rounding up the best and cheapest SIPPs on the market in 2025.