Equity release adviser Key has calculated that the annual cost of being retired mounts totals £11,830 a year or nearly £230 a week.
Costs mount up from spending on the basics such as food, clothes and utility bills while leaving some spare cash for eating out and entertainment, the analysis of the latest Government spending data shows.
The weekly bill of £227.50 per person needed to fund the basics amounts to 35% more than the full basic State Pension of £168.60 available for those who qualify, underlining the need for other sources of income in retirement.
The national average cost of retirement at £11,830 a year does not paint the full picture for the UK as a whole – the cost of retirement in the South East of England is nearly £4,000 a year more at £14,270 than in the West Midlands where the cost is £10,280.
Retired people in the South East, South West, London, East Anglia and the East Midlands all need to find more than the national average while the less expensive areas of the country include Wales, Northern Ireland and the North East of England.
Key’s analysis shows the two biggest weekly costs are utility bills – gas, electricity and water – and food with both accounting for 20% of spending. Both cost around £2,370 a year on average.
Transport, including the cost of running a car, eats up around 16% of bills while spending on entertainment costs around 23%.
The basic costs in retirement underlines the need to maximise income from all sources available including property. Key’s data shows retired homeowners using equity release plans take an average £76,500 in property wealth from their homes which is enough to fund six-and-a-half years of the basics without spending on anything else. The property wealth released would be enough to cover the shortfall between the State Pension and basic spending for nearly 25 years.
Will Hale, CEO at Key said: “With retirees needing 35% more than the full state pension provides, people need to think carefully about how they will bridge this gap. Workplace and private pensions as well as savings and investments can help but for most people maintaining a decent standard of living in retirement means maximising all sources of income. Property is increasingly a major part of retirement planning with retired households literally sitting on more than £1 trillion of wealth.
“The money that older homeowners can access through equity release is substantial and is being used for a wide range of needs. This includes helping other family members by gifting, boosting basic levels of retirement income and even paying for unexpected expenses or home maintenance. Good specialist advice is key to ensuring that older homeowners receive the most benefit from their property wealth and use it in the most appropriate way for them and their families.”