We’re living VERY comfortable lifestyles … and our pensions are less than £45,000. So many experts think you need thousands to retire happily – but we’re proof you don’t

According to money experts, you currently need more than £45,000 a year – after tax – to fund a ‘comfortable’ lifestyle in retirement – nearly £63,000 if you’re a couple.

For most people either in, or approaching, retirement, these figures are no more than a pipe-dream. Official Government data indicates that the average retirement income in the UK is hovering around £33,800 – and that’s before tax shrinks it down to £29,555.

For women, in particular, retirement is financially challenging. The latest Women & Retirement report published by Scottish Widows shows that only 27 per cent of women are on track for a ‘comfortable’ retirement, and a third face poverty.

So there’s a yawning gap between the actual income many people have to support themselves through their later years – and the income we are told we need to ensure a ‘comfortable’ standard of living in retirement.

Yet it’s not as black and white as this suggests. According to readers who I have spoken to in recent days, their definition of ‘comfortable’ differs markedly from that used by the financial services industry, which is based on Retirement Living Standards data compiled by lobby group Pensions UK.

In other words, they get by quite happily on income far less than either £45,000 or £63,000.

Pensions UK says £45,400 a year post-tax enables a single person to enjoy a ‘comfortable’ retirement. It allows them to do all sorts: run a three-year-old ‘small car’, enjoy a two-week annual holiday in the Mediterranean (half-board in a decent hotel) and have three weekend breaks in the UK.

This is on top of home maintenance, clothes and footwear, the weekly shop, eating out and having an occasional takeaway. Plus spending on birthdays, Christmas gifts, treats for the wider family (grandchildren, for example) and charitable donations.

Fine. But not everyone needs such a sizeable income to sail through retirement without money concerns. 

Among them is Beverly Parker who enjoys a ‘big life’ on just 40 per cent of the income Pensions UK says is needed for a ‘comfortable’ later life.

‘I am tired of reading articles that claim pensioners can’t live a happy life on an annual income which is less than £30,000 or £40,000,’ says Beverly, who is 73 and lives on her own in Bromsgrove, Worcestershire.

‘It’s not true. It really is not difficult to live the life on a small income. It’s about cutting your coat according to your cloth. I enjoy every single day of my life.’

Richard Rutherford, a 67-year-old former civil servant from Sevenoaks in Kent, agrees.

Although his annual income is higher than Beverly’s – but way below the £45,400 Pensions UK definition of a comfortable retirement for a single person – Richard keeps a tight grip on his expenditure. 

He says: ‘I rarely pay full price for anything. I scour charity shops for good-as-new items, purchase BOGOFs [buy one, get one free], and do my food shopping after five o’clock when many supermarket items are half price.

‘Enjoying retirement on a modest income is possible. It’s all about having the right mindset.’

Clare Moffat is a pensions and tax expert at financial mutual Royal London. She hosts regular retirement seminars and says one of the most asked questions is about how much income people need to fund their life post-work.

Some, she says, come to the seminars having been panicked by the RLS data into believing retirement is going to be nothing but one long financial struggle.

‘Our response is to say that the Retirement Living Standards numbers are just a guide,’ Moffat says. ‘At the end of the day, we are all individuals with different retirement needs. The key is to ensure that as we approach retirement, we have enough in our financial armoury to cover our likely spending in later life.

‘For some, spending needs will be low. For others who like to travel overseas and have expensive pastimes, they will be higher.’

Beverly says she has more than enough retirement income to satisfy her needs. She started her working life at the age of 16 after being the only child of her age at school to get an O-level in maths.

It helped get her a job at National Provincial (now NatWest) in Birmingham – and then at Scottish Widows just down the road where she worked for 18 years, becoming deputy branch superintendent.

After taking time out to have two children – James and Heather – she decided to go to college full time where she obtained a Higher National Diploma in business and finance. It led to a number of jobs in finance, with her last being at a local accounts firm in Bromsgrove. She retired six years ago.

Today, Beverly’s retirement income is made up of her state pension plus a small Scottish Widows pension. In total, that makes for an annual income of £17,000.

So how does Beverly live a ‘big life’ on such a modest income?

Living without debt

Beverly has never had a mortgage nor any debt. Although she has a credit card, she always pays the balance in full every month.

She says: ‘I started poor, never borrowed and always lived within my means. It made the jump from work to retirement much easier.’

She left her husband 16 years ago with the proceeds from the sale of the family home being split 50:50. She now lives in a three-bedroom detached house and drives a 12-year-old Mazda.

Always being savvy

Beverly ‘aims for value for money in everything she does’.

She says: ‘I go into Bromsgrove where I get two hours of free parking. I buy an egg and sausage muffin deal at Wetherspoons, which comes with coffee and free refills, and walk away with change from £4, having enjoyed the company of long-standing friends.

‘When I eat with friends at Harvester in nearby Droitwich, free membership of its Flavour Fan Club means I always get at least 25 per cent off my bill.’

Seeking out deals

Shopping around for broadband and other deals is a given.

‘I have breakdown cover with AA,’ says Beverly. ‘For the past four years, I’ve paid £46 a year to cover me for a 26-mile radius from my house. It means I can visit my 97-year-old mum, 12 miles away, knowing the AA will come to my rescue if anything goes wrong with my Mazda.’

She has a ‘hand me down’ iPhone to receive calls only, and has a BT YourView box to watch Freeview TV channels.

Holidaying at home

Having travelled overseas a lot in her working life, Beverly is now content to go on occasional coach trips – three or four a year – in the UK with friends.

‘They don’t cost the earth and we have a right laugh,’ she says.

Recent visits include trips to Blenheim Palace in Oxfordshire, Chatsworth House in Derbyshire, and Belvoir Castle in Leicestershire.

Similarly, Richard has no debt, pays in full any credit card bill, and only travels in the UK using his senior railcard and free bus pass. While he keeps a tight rein on spending, he still enjoys regular meals out and visits to the local cinema and theatre.

Beverly believes contentment in retirement is not just about money. She says: ‘It’s also about happiness and surrounding yourself with people you love.’

Sara El-Sharawy, a 70-year-old maths teacher, agrees. In April last year, Sara took the bold step of moving out of the Hastings home she had lived in for 33 years and bought a terraced house overlooking Eastbourne Harbour, in East Sussex.

Although Sara’s income – a mix of state and teacher’s pension – is higher than Beverly’s, she agrees that happiness and quality of life are just as important in retirement as wealth.

‘I’ve never been more content,’ says Sara. ‘I can sit on my balcony and admire the sea view. I cycle everywhere, do a bit of swimming and run dance events for Happy Feet Sussex.

‘Sometimes, our wealth is as much the things around us as the size of retirement income coming into our bank account.’

It’s a message that insurer Legal & General recently put out after it backed a survey of 3,000 representative retirees in the UK. It found the happiest retirees are those on a post-tax retirement income of £1,700 or more a month for an individual – or £20,400 a year. In other words a full £25,000 a year less than the Pensions UK sum.

Above £2,000 a month, the boost to happiness levels off.

So clearly, you don’t need a fortune to enjoy retirement.

Pension guides