In a significant blow to the Cost of Living, state pensioners who are single face a financial challenge referred to as the “singles tax.”
A recent report has highlighted that single individuals must save a substantial £290 every month from the age of 22 to secure a moderate standard of living in retirement.
This could have a far-reaching impact on those who are preparing for retirement on their own.
According to the Pension and Lifetime Savings Association Retirement Living Standards (PLSA), a single person will need to build a pension pot of approximately £330,000 by the time they retire.
In contrast, couples only need to save half that amount — £165,000 each — to achieve the same standard of living.
The Financial Challenge for Singles
Single individuals face a significant financial disadvantage when it comes to saving for retirement. The figures provided by PLSA suggest that single pensioners are at a distinct disadvantage, with the savings required for a comfortable retirement being substantially higher than that of couples.
Required Monthly Contributions: Singles vs Couples
- For Singles (Starting at Age 22): A single person must save £290 each month to reach a pension pot of £330,000 by retirement.
- For Couples (Starting at Age 22): Couples only need to contribute £145 each per month to reach a combined savings of £330,000.
The difference is stark: singles need to save twice as much as couples to secure a similar standard of living in retirement.
The Long-Term Impact: Starting Late
For those who start saving later in life, the monthly contributions required become even more demanding:
- For Singles (Starting at Age 38): If a single person begins saving at age 38, they would need to contribute a significant £585 each month to achieve the same moderate standard of living by retirement.
- For Couples (Starting at Age 38): Couples in the same situation need to contribute £290 per month between them.
This indicates that the earlier individuals start saving for retirement, the less they need to contribute each month to ensure a comfortable retirement.
Why Single People Face Higher Costs
The extra financial burden for single people is often due to their inability to share costs. From bills to holidays and even basic day-to-day expenses, life can be more expensive for singles because they do not have someone to split costs with.
This means that single pensioners often have to find ways to save more, despite having a lower disposable income compared to couples.
Camilla Esmund, senior manager at Interactive Investor, pointed out the difficulty of building wealth as a single person, especially since the everyday costs tend to be higher when you don’t have a partner to share them with.
This makes long-term financial planning and resilience even more challenging.
PLSA’s Retirement Standards: A Comparison
The figures from the PLSA reveal the significant gap between single people and couples when it comes to saving for retirement.
Here’s a comparison of the required savings and monthly contributions based on starting ages:
| Age | Single Person Monthly Contribution | Couple Monthly Contribution |
|---|---|---|
| Starting at Age 22 | £290 | £145 (each) |
| Starting at Age 38 | £585 | £290 (combined) |
As shown in the table above, the amount that singles need to save is almost double that of couples, and those who start later in life are required to save even more to reach the same retirement goal.
What Does This Mean for Future Retirees?
The figures presented by the PLSA are not just theoretical; they provide a clear picture of the future challenges faced by single people when it comes to retirement savings.
The disparity in savings required highlights the additional burden that singles face, and emphasizes the importance of starting early to ensure financial stability later in life.
In conclusion, the “singles tax” is a harsh reality for state pensioners, and singles are significantly disadvantaged when it comes to saving for retirement.
With the need to save £290 monthly from the age of 22, single individuals must be more proactive and strategic with their financial planning.
For those starting later, the required contributions will be even higher, making it even more difficult to reach a moderate retirement standard.
FAQs
Why do single people have to save more than couples for retirement?
Single people don’t have a partner to share living expenses, which means they face higher day-to-day costs and need a larger pension pot.
How much does a single person need to save monthly for a moderate retirement?
A single person must save £290 per month from the age of 22 to build a pension pot of £330,000.
What happens if a single person starts saving later for retirement?
If a single person begins saving at age 38, they would need to save £585 per month to reach the same goal.