Rising food and fuel prices have seen the Pensions and Lifetime Savings Association's (PLSA) minimum living standard increase by 19 per cent, compounding industry calls for the government to implement auto-enrolment reforms.

The increase was announced as part of an inflationary update of the PLSA's Retirement Living Standards (RLS), with the annual increase in what is needed to reach each living standard over the past year "by far the largest" since the standards were established in 2019.

In particular, the update found that people on the minimum lifestyle have seen the biggest percentage increase to the cost of their retirement, owing to the higher proportion of their budget going towards the things that have risen the most in price, food and energy.

As a result, the cost of the minimum income standard, which is the same as the Joseph Rowntree Foundation’s Minimum Income Standard (MIS), increased by 18 per cent for a single person, rising from £10,900 to £12,800, with a 19 per cent increase, from £16,700 to £19,900, for a couple.

In light of this "disproportionate" increase, the PLSA highlighted the government’s recent commitment to the state pension triple lock as especially important, noting that, based on the record 10.1 per cent increase expected, a couple who are each in receipt of a full new state pension would reach the minimum RLS.

The update, which was based on independent research from the Centre for Research in Social Policy at Loughborough University, found that the cost to achieve a moderate level has also increased by 12 per cent to £23,300 for a single retiree and by 11 per cent for a couple to £34,000.

Based on this, a couple sharing costs with each in receipt of the full new state pension would need to accumulate a retirement pot of £121,000 each, based on an annuity rate of £6,200 per £100,000, to achieve a moderate level.

Meanwhile, the cost of living for a comfortable retirement increased 11 per cent, to £37,300, for one person and 10 per cent, to £54,500, for a two-person household.

This would require a couple sharing costs with each in receipt of the full new state pension would need to accumulate a retirement pot of £328,000 each, based on an annuity rate of £6,200 per £100,000.

However, the PLSA also acknowledged that, across all levels, higher interest rates are expected to help to alleviate the cost pressure of higher prices as savers are able to get more attractive rates on annuities for their retirement pots than in recent years.

Despite this, the PLSA emphasised the need for the government to enact reform around auto-enrolment, with PLSA director policy & advocacy, Nigel Peaple, urging the government to adopt the recommendations outlined in the PLSA's recent report.

He stated: “The past year has been an enormously challenging one for many households in the UK.

"Inflation has risen to its highest rate in 40 years with the cost of essentials and domestic fuel soaring, putting substantial pressure on incomes for working age and retired households, particularly for those on low incomes.

“The jump in the RLS underscores the need for the government to adopt the PLSA’s recommendations on pensions set down in our recent report, “Five Steps to Better Pensions”.

"These include the need for the government to adopt clear national objectives for retirement income, to ensure the state pension protects everyone from poverty and, later this decade once the cost-of-living crisis has passed, to increase the scope and level of automatic enrolment pension contributions.”

Adding to this, People’s Partnership, provider of The People’s Pension, director of policy, Phil Brown, highlighted the revised figure as "further proof, if needed, that few are immune from the cost-of-living crisis".

“Our own research has previously shown that through pension saving alone, only 18 per cent of the population would achieve a moderate standard of retirement while 4 per cent would enjoy a comfortable retirement, and it is highly likely that number has reduced in recent months," he continued.

“This, coupled with the fact that the current situation has impacted the lowest earners the most, means that automatic enrolment is more important than ever before.

“Once we are through the worst of the current crisis, it is vital that not only are the recommendations in the 2017 automatic enrolment implemented, but that there is a meaningful conversation around the future objectives of a policy, which has already brought nearly 11 million more people into pension saving.”

Aviva director of workplace savings and retirement, Emma Douglas, agreed that longer term reform of auto-enrolment is needed, highlighted the update as a "timely reminder of the importance of factoring the impact of inflation into retirement planning".

She continued: “The PLSA’s recommendations – Five Steps to Better Pensions – will help form a new national consensus on how best to build upon a decade of AE success so everyone can achieve the right income in retirement.

"The combined successful implementation of these recommendations could make a huge difference to the retirement income of today’s savers.

"Now, in the middle of a cost-of-living crisis, is not the time for radical change but by providing a clear ‘roadmap’ for reforms, government will give employers and pension savers time to plan, which will help to ensure better retirements.

“The clock is ticking. The longer it takes for action, the less there will be in the pension pots of lowers earners, people with multiple jobs and part-time workers – and particularly part-time working women.”

Hargreaves Lansdown senior pensions and retirement analyst, Helen Morrissey, also emphasised the need for reform, adding: “These latest figures show the eye-watering toll the cost-of-living crisis has had on retirees’ standards of living over the past year.

"Auto-enrolment clearly has a hugely important role to play in filling the gap going forward but for those people already at, and approaching, retirement age, we are seeing the squeeze really starting to hurt.

"This is because people who had previously retired during the pandemic realise their plans are starting to come unstuck, and that if they want to support their lifestyle they will need to return to work.

"There are signs inflation may be past its peak and we may start to see it begin to fall back but it is clear the pressure on pensioners’ pockets looks set to remain for some time.”

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