Pensioner living costs hit £10,387-a-year, so do you have enough saved to cover the bare necessities?
People nearing their pension age can expect to fork out more than £10,000-a-year in living costs in retirement, research by Key Retirement Solutions has found.
The average cost of being a pensioner is £10,387-a-year, according to analysis that calculated how much over-65s spend on basic necessities.
The typical pensioner household will have an annual food bill averaging £1,563 - the biggest expense - with spending on housing and fuel costing £1,485.
Hefty: Pensioner households spend more than £10,000-a-year on basic living costs.
The total outstrips the value of most people's state pensions by thousands of pounds, putting pressure on anyone without any other savings, particularly single pensioners who can't rely on a partner's state pension.
The pressure is at its highest in the South East of England, where over-65s can expect to need an income covering £11,945 of costs every year, with London pensioners needing £11,322 and those in the East of England £11,144.
The cheapest place to live is in Wales, with annual pensioner bills just £8,829-a-year.
Dean Mirfin, of Key Retirement Solutions, said that the figures highlight the importance of planning your finances in retirement to ensure you're not in for a nasty shock once you give up work.
He said: 'The basic cost of being a pensioner at more than £10,000 will come as a considerable shock to many, and those approaching retirement must be made aware of the real need to plan carefully, as the annual income does not cover much in the way of luxuries or leave scope for any emergencies.
'Where people live is also a major factor as the difference of more than £3,100 a year – or 35% - between Wales and the South East of England demonstrates.
'It is crucial that pensioners and those in the run-up to retirement focus on their retirement planning, as current basic State Pension and even the new planned flat rate state pension will not cover the basic costs of being a pensioner in any region of the UK.'
The new flat-rate state pension will be introduced in April 2016 and is expected to be worth around £8,000-a-year.
But not everyone will initially qualify for the full amount as they may have incomplete National Insurance records or will have their payouts reduced because they were contracted-out of the second state pension.
Major cost: Food is the biggest expense for pensioners ahead of housing and fuel bills.
It's crucial therefore that retirees have another source of income to supplement their state pension and cover the bare necessities.
Figures from the Office of National Statistics released last week showed that workplace pension savings accounted for 27 per cent of pensioner household incomes, with other sources including personal pensions, investment income, or earnings from part-time work.
Annuity and equity release company Just Retirement has this week urged people to make their money work for them in retirement, rather than leaving their savings languishing in poor-paying accounts.
It came after a survey it conducted found that 41 per cent of over-55s expect they will take money out of their pensions once new freedom rules are implemented next year and place them into savings, leaving them at the mercy of inflation.
A further 16 per cent expect to keep the money invested, while 19 per cent would use it to pay off mortgages or credit card debts.
Stephen Lowe, of Just Retirement, said: 'People like the certainty of cash, but modest returns combined with inflation can quickly erode its buying power. Assets such as shares and bonds usually perform better over the long term but there are no guarantees. Our research found that 72 per cent of over-55s would be unwilling to take investment risk to increase returns.
'Cash obviously has its place in financial planning, for short-term savings, building home deposits and for rainy day money.
'Our worry is that many people, particularly those with more modest pension provision and no access to advice, could strip out money from their tax-efficient pensions but then end up parking it in cash which will lose its value and won’t deliver a sustainable income.'
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