What kind of retirement do I want?

Perry Goodwin, Veterinary Care Assistant, Spring Lodge Veterinary Hospital

"It’s my first time in a pension scheme. The website is very clear to use."

Perry Goodwin, 24, is a veterinary care assistant at Spring Lodge Veterinary Hospital in Witham, where he’s saving up to buy a house. Having been enrolled in Nest for a year, it’s his first time saving in a pension.

Even though Perry’s first priority is saving up to buy a house, he also recognises the importance of putting money away for the future. He’s happy that he’s saving in his Nest account, which he feels is so simple, he doesn’t need to worry about it.

Being auto enrolled into Nest means that Perry is able to concentrate on what he needs now, in the knowledge that Nest will be there for him in the future - and he hopes it will mean he can still enjoy some of the things tomorrow that he likes to spend money on today.

Where does the £10,000 annual figure for basic living costs come from? 

The Minimum Income Standard for the UK is calculated by how much money people need based on public views about a minimum standard of living that nobody should fall below.

The figure of around £10,000 is for a single person – a retired couple need about £14,300 a year between them.

What the figure includes:

It assumes that during retirement, once your mortgage is paid off, you should be able to afford standard outgoings (food, gas, electricity, etc.). You should also be able to make some personal purchases, have a social life, enjoy a week's holiday, and still be able to pay for everyday technology such as mobile phones and internet access. 

What the figure doesn't include:

It does not include things beyond what is seen as necessary for an acceptable lifestyle once you retire, e.g. - a car or TV packages. It also assumes spending on discretionary items, such as eating out, will be fairly low.

If you’ll be paying a mortgage or rent in retirement you will need to factor in these costs separately.

For a more personalised figure that suits you and your family, you can use the online calculator at http://www.minimumincome.org.uk/.

Luxury costs:

2-week annual holiday. The £10,000 figure for basic living costs already budgets for a one-week UK holiday. If you’d like to enjoy a two-week holiday every year in Europe or the UK, you would have to allow for an additional cost of £2,500.

Car + 5-yearly upgrade. For a new car worth £14,000, UK motorists annually spend an average of £1,660 on running costs* (and to replace it every five years you'll have to save around £2,800 a year).
*Source: Money Advice Service. You can use the Money Advice Service’s Car Costs calculator to find how much it costs to run a car.

Social activity. Whether it’s dinner, drinks or attending a show, the £10,000 figure includes a budget of £40.68 per week for activities. However, if you enjoy going out more regularly we’ve estimated an extra £3,000 per year, assuming 4-5 outings per month.

Shopping. Only food shopping is included in the £10,000 basic living costs figure – for non-food items such as clothing and electronics we've estimated an annual figure of £1,500.

Gym membership. The average annual gym membership costs around £400 a year.

Home improvements. One percent of the home’s purchase price is commonly set aside each year for ongoing maintenance. The average house price in the UK is currently about £320,000 (May 2018*), so we have allowed for £3,200 per year for maintenance. 
*Source: Zoopla https://www.zoopla.co.uk/house-prices/uk/