Retirement income statistics in the UK: a comprehensive overview

What is the average retirement income in the UK?

The average retirement income for a single pensioner in the UK is £13,884 annually, while couples have £29,172 a year. This figure reveals a significant gap compared to the average gross annual earnings of £37,430 for full-time working-age individuals in the UK. 

After accounting for tax and national insurance (NI), net annual earnings typically fall to around £30,469, further illustrating the financial challenge retirees face. 

The sources of income for retirees typically come from three key areas.

Firstly, the state pension is a staple for many. Secondly, private and workplace pensions play a significant role, with approximately 70% of retirees in the UK relying on these extra income streams. Workplace pensions, particularly defined contribution schemes, are now increasingly common.

Lastly, additional savings and investments such as individual savings accounts (ISAs), property income, or other financial assets provide essential top-ups to ensure retirees can maintain their desired standard of living.

The average retirement age statistics reveal while the state pension age is currently 66, a significant proportion of people plan to retire earlier, with 38% aiming to stop work by the age of 60 and 19% before 50, according to Charles Stanley.

Regional variations also exist. For example, retirees in the South East represent the largest retired population, with 19.45% of residents aged 65 or over. Gender discrepancies persist, as women often receive less than men due to the gender pension gap.

These retirement statistics highlight that lifestyle plays a significant role in determining the income needed during retirement.

While some retirees aim to cover basic living expenses, others aspire to enjoy a more comfortable lifestyle that includes travel, leisure, and greater financial flexibility. 

Where does the majority of retirees’ retirement income come from?

Retirement income in the UK typically comes from the following sources:

• The state pension
• Workplace and private pensions
• Personal savings and investments
• Income-related benefits (e.g., pension credit)
• Part-time employment

The state pension remains the largest single source of income, particularly for single retirees, where it often makes up over 50% of their total income. For couples, workplace pensions contribute more significantly, reflecting the success of auto-enrolment schemes. 

Despite this, retirement data suggests 14% of UK adults have not started planning for retirement, risking serious financial shortfalls.

Personal pension vs SIPP: which is best for you?

The choice between a personal pension and a self-invested personal pension (SIPP) depends largely on an individual’s financial goals, experience, and investment preferences. 

Both options are essential vehicles for retirement planning.

A personal pension is managed by a provider who handles the investments on your behalf. It’s ideal for those seeking simplicity, with fees averaging 0.5% to 1% annually. Notably, the average annual contributions to private pensions increased to £1,900 in 2022/23.

In contrast, a SIPP allows greater investment control, enabling individuals to invest in a wider range of assets, including stocks, bonds, and funds. However, SIPPs often involve higher fees, such as setup costs and transaction charges, reflecting the added flexibility.

Access to funds for both begins at age 55 (rising to 57 in 2028), with up to 25% of the pot available tax-free. SIPPs suit experienced investors who want flexibility and control, while personal pensions cater to those preferring a hands-off, professionally managed approach.

What is the average state pension in the UK?

The state pension is a crucial source of income for UK retirees, providing essential financial support in later life. 

There are two types of state pension. The basic state pension, for those who reached retirement age before 6 April 2016, pays a maximum of £169.50 per week, while the new state pension, introduced on 6 April 2016, pays up to £221.20 per week.

The amount a retiree receives depends on their NI contributions, with 35 qualifying years required for the full new state pension and a minimum of 10 years required for any payments at all. 

Deferring the state pension increases payments by 1% for every 9 weeks, equating to an annual rise of 5.8%.

The triple lock ensures annual increases in line with the highest out of inflation, average wage growth, or 2.5%, protecting retirees against rising living costs.

Will my retirement income be enough?

Whether your retirement income will be sufficient depends on your savings habits, expected lifestyle, and inflation.

According to the Pensions and Lifetime Savings Association (PLSA), a single person requires £14,400 annually for a minimum lifestyle, £31,300 for a moderate lifestyle, and £43,100 for a comfortable retirement.

If you’re a couple, the PLSA recommends having £22,400 a year for a minimum lifestyle, £43,100 for a moderate one or £59,000 for a comfortable retirement. 

Income requirements have increased over the years due to several key factors. Rising living costs, driven by inflation, have made essentials such as housing, utilities, and food more expensive.

In addition, increasing life expectancy means retirees must fund longer retirements, sometimes spanning 20 years or more.

Retirement age statistics show the age at which more than half of people retired increased from 64 to 66 between 2011 and 2021, reflecting adjustments to the state pension age and economic pressures that have extended working lives.

Confidence in retirement planning remains a concern.

A recent Unbiased survey conducted by YouGov spoke to 2,000 UK adults aged between 18 and 99. It revealed that confidence in retirement planning drops sharply with age, starting at 44% among young adults and then falling to only 31% among older people.

This is supported by data elsewhere as just 18% of UK adults feel ‘very confident’ in their retirement plan and a further 42% ‘somewhat confident,’ according to Charles Stanley, leaving many uncertain about their financial preparedness for later life.

This lack of confidence highlights the importance of understanding how much retirement will cost and whether savings, pensions, and investments will be sufficient to meet individual needs.

To evaluate whether your income will be enough, ask yourself the following:

• What kind of lifestyle do I want in retirement?
• How much have I saved in pensions, savings, and investments?
• Am I accounting for the impact of inflation?
• How long do I expect my retirement savings to last?

Given the uncertainty around future costs and changing expectations, regularly reviewing your retirement savings plan is essential.

With rising inflation, longer retirements, and increasing financial pressures, early planning and consistent saving are critical to achieving financial security in later life.

Get expert financial advice

As various retirement statistics show, planning for your golden years requires understanding your income needs, savings options, and factors like rising costs and longer life expectancy.

While the state pension provides a foundation, it’s rarely enough to sustain your desired lifestyle. Proactively saving, exploring pensions, and regularly reviewing your plans are key to achieving a secure and comfortable retirement.

Let Unbiased match you with a professional financial adviser to ensure your retirement income meets your lifestyle goals.