Why Retirement Living Standards can't be pension targets

Summary

Head of Policy David Brooks argues that Retirement Living Standards are useful because they help people picture what different retirement lifestyles could look like – but they shouldn’t be treated as pension targets, because they’re based on broad assumptions rather than personal circumstances. Target Replacement Rates offer another useful lens by linking retirement income to someone’s own earnings, but they have limits too. The key takeaway is that both measures can support better retirement conversations, as long as they’re used as guides, not definitive answers.

Table of Contents

Retirement Living Standards help people picture retirement, but they aren’t pension targets

The latest Retirement Living Standards from Pensions UK (formerly the PLSA Retirement Living Standards) have received significant public attention since they were published several weeks ago. That’s not surprising. They take a complicated question (“how much is enough for retirement?”) and turn it into three simple lifestyle categories:

Minimum: £13,900 a year for one person, or £22,500 for a couple
Moderate: £32,700 a year for one person, or £45,400 for a couple
Comfortable: £45,400 a year for one person, or £62,700 for a couple

Those figures are useful because pensions are often difficult to understand. Most people don’t naturally think in terms of contribution rates, pot sizes or investment assumptions. They think about what retirement might actually feel like: whether they can run a car, take holidays, support family members or maintain the kind of home life they want.

The new standards give savers, employers, trustees and providers a shared language for discussing retirement in practical, human terms.

My concern isn’t that the Retirement Living Standards exist. It’s that they’re increasingly being asked to do a job they weren’t designed to do. They work well as an illustration and a starting point for engagement. The issue begins when they’re treated as the answer: a target, a definition of adequacy or a measure of what every person needs in retirement.

Now that it’s been several weeks since their release, here’s how savers, employers and trustees can start thinking about these standards more productively.

The problem starts when lifestyle examples are treated as personal benchmarks

The Retirement Living Standards are based on illustrative spending baskets. These set out what someone might spend on areas such as household bills, transport, food, leisure, holidays, clothing and gifts.

That makes them a useful way of bringing retirement to life. The problem is that they’re increasingly treated as something they were never designed to be: a personalised measure of what someone needs in retirement.

There are three reasons for that.

They reflect assumptions, not individual preferences: Different households will make different choices. Some people will prioritise travel, others family support. Some will want to run a car, others won’t. None of those choices are wrong, but they mean retirement spending can vary significantly from one person to the next.
They can create a false sense of precision: Each standard comes with an annual income figure, which makes the framework easy to communicate. But a clean headline number can look more exact than it really is. It’s a guide based on assumptions, not a definitive answer to retirement adequacy.
They can’t reflect individual circumstances: Housing is the clearest example. Someone who owns their home outright will have very different retirement income needs from someone renting privately or still paying a mortgage. Health, location, caring responsibilities and wider wealth can all have a significant impact too.

The Retirement Living Standards have become influential because they’re easy to understand. That strength becomes a weakness if they’re treated as a universal benchmark.

Used properly, they can help people start thinking about retirement. Used incorrectly, they risk becoming a target that was never intended to be one.

Retirement planning needs more than one measure

This is where Target Replacement Rates can be useful.

Unlike the Retirement Living Standards, Target Replacement Rates don’t start with a set lifestyle basket. They look at how much of someone’s working-life income they may need to replace in retirement.

That gives a different view of adequacy. It links retirement income to someone’s own circumstances, rather than asking whether they match a standardised version of retirement.

But this approach has limitations too:

It can miss wider wealth, including ISAs, property or other savings
It may not reflect housing costs, debt, health or family responsibilities
It tells us how income compares to previous earnings, but not what that income will actually buy
It still can’t replace personalised planning

The answer isn’t to swap one benchmark for another.

Retirement Living Standards are useful because they show what different levels of retirement spending might look like. Target Replacement Rates are useful because they link retirement income back to someone’s own earnings.

Both can support better conversations. Neither should be treated as the final answer.

Used properly, Retirement Living Standards can help people start thinking about retirement in practical terms. Used too firmly, they risk becoming a target they were never intended to be.

The question isn’t whether the standards are useful. They are. The question is whether they’re being used for the right purpose.