The average pension needed to meet basic needs in retirement surged by 60 per cent in the cost-of-living crisis, rising from £70,000 in 2021-22 to nearly £110,000 in 2023-24, research from Resolution Foundation, commissioned by the Living Wage Foundation, has found.

The research found that on average a worker needs an income of £19,300 a year in retirement to achieve a basic standard of living, although this varied from £13,500 to £28,400 depending on relationship status and housing tenure.

In particular, the research revealed that single home owning pensioners would need £258 a week (or £13,500 annually) and pensioner couples that own their own home would need £395 a week (or £20,600 annually).

However, those who don’t own their own home will need a "substantially" higher income, as single pensioners who live in the private rented sector would need an additional £6,900 a year (£20,400) compared to a homeowner to achieve an acceptable standard of living.

When averaged out across different relationship statuses, housing tenures, genders and average life expectancy, the researchers found that the average pension pot size needed in addition to a full state pension to achieve an annual income of £19,300 in retirement is £107,800 for 2023-24.

The research also highlighted growing concerns over savers' ability to retire, revealing that more than half (53 per cent) of UK adults saving into a pension think they would never be able to retire, while 62 per cent think they will have to work several years beyond retirement age.

Despite falling inflation, the Living Wage Foundation found that these figures are largely unchanged since 2023.

These concerns were also heightened for low paid workers, women, and those living in rented accommodation had more negative feelings toward their retirement savings.

Indeed, the research found that nearly two thirds (65 per cent) of workers paid below real living wage felt they would never be able to retire, compared to 54 per cent of those paid the real living wage and 47 per cent earning above it.

In addition to this, 58 per cent of women said they would never be able to retire compared to 47 per cent of men, while 59 per cent tenants think they will never be able to retire compared to 48 per cent of homeowners.

Despite these concerns, the polling also found that around one in 10 workers saving into a pension had stopped or cut their contributions in the last six months, roughly unchanged since 2023, despite inflation falling.

A higher proportion of low paid workers (17 per cent), women (10 per cent) and renters (12 per cent) also cut or stopped their contributions.

Given the findings, Living Wage Foundation stressed the need for more businesses to join the Living Pension Employer movement, warning that many workers are already struggling to make ends meet today," and the prospect of saving for the future feels "even more daunting".

Living Wage Foundation director, Katherine Chapman, said: "The news that workers now require a significantly larger pension pot to cover basic living costs in retirement will undoubtedly be alarming for many, particularly low paid workers who have borne the brunt of rising prices over the past two years.

“No one should have to choose between getting by today and securing their future. This is why we launched a Living Pension accreditation - helping employers ensure their staff can retire with dignity and without fear of poverty.

"We recently welcomed County Insurance as our 50th accredited Living Pension Employer, and we urge more businesses to join the movement. Together, we can build a future where everyone can look forward to retirement with confidence that they can meet everyday needs."

Resolution Foundation economist, Molly Broome, added: “While an increasing number of workers in the UK are saving for retirement, many low earners are not saving enough to achieve a minimum standard of living in retirement.

“Both policy makers and businesses must look to address this challenge. By becoming Living Pension-accredited, employers can be part of the solution and help their staff towards a better income in retirement.”

The Living Wage Foundation’s Living Pension accreditation, which is based on the research, is a voluntary savings target for employers who want to help workers build up a pension pot that will provide enough income to meet basic everyday needs in retirement.

Living Pension Employers commit to providing a Living Pension savings level, using either a cash (£2,800) or percentage (12 per cent) target, with a minimum of 7 per cent, or £1,630, contributed from the employer.

However, the group acknowledged that the amount a worker on the real living wage needs to save to build up a pension pot of this size will vary depending on how many hours they work, how many years they work, the age they start saving at and their level of pay.

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