Pensions: how much money do you need for retirement?

Giving up work and retiring may sound exciting but it is getting more expensive for people to enjoy their golden years.

Those wanting a retirement above the basic standard will need a "higher income than ever before", said BBC News, based on the latest industry benchmarks from the Pensions and Lifetime Savings Association (PLSA).

The cost of a "moderate and comfortable" retirement has "jumped again", said MoneyWeek, meaning you may have to "save more for your desired standard of living".

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How much money do you need to retire?

Ultimately, "saving as much as possible, as early as possible", said Which?, will put you in the "strongest financial position for life after work".

To help estimate how much you will need, the PLSA uses calculations by the Centre for Research in Social Policy at Loughborough University each year to describe the cost of three different retirement living standards: Minimum, Moderate, and Comfortable.

The PLSA assumes there are no mortgage or rental payments and looks at the typical cost of bills, entertainment, holidays and other luxuries to provide a guide to the costs of living in retirement, "not a fixed savings target".

The cost of a basic retirement

In some good news, the "cost of covering the basics has finally fallen", said LoveMoney.

The PLSA estimates that lower gas and electricity prices have reduced the cost of a minimum standard of living in retirement by £1,000 for a single person to £13,400 and by £800 to £21,600 for a couple.

This is based on a "no-frills" retirement, said MoneyWeek, including a week's holiday in the UK every year, eating out about once a month and some affordable leisure activities about twice a week.

How much does a moderate retirement cost?

The moderate retirement living standard provides "more financial security and flexibility" than the minimum, according to the PLSA. This includes a yearly holiday overseas, a long weekend break and a weekly takeaway as well as eating out twice a month.

But the annual cost has increased by £400 to £31,700 for an individual retiree and by £800 to £43,900 for couples.

How much does a comfortable retirement cost?

Those wanting to enjoy the "finer things" have seen the cost of a comfortable retirement rise from £43,100 per year for a single-person household to £43,900 and from £59,000 to £60,600 per year for a couple, said MoneyWeek.

A comfortable retirement budget allows for spending on extra luxuries such as regular beauty treatments, theatre trips and a two-week holiday in Europe each year.

How much should you save into your pension?

The general rule of thumb, explained LV, is that you'll need between half and two-thirds of the income you had when you were working (after tax) to maintain your lifestyle once you retire. The actual amount you need in retirement will depend on your living standards and ultimately where, when and what you want to spend your money on.

If you plan to go on luxurious holidays, said The Times Money Mentor, then you will need a "higher income than someone who plans to spend most of their time gardening and reading books".

The PLSA estimates that a single person who wants a comfortable retirement would require a pension pot size of £540,000 to £800,000 to get the desired income from an annuity.

Before you "throw your hands up in despair", said Helen Morrissey in Yahoo Finance, remember that these aren't "hard and fast" figures and the key thing is to consider "what retirement means for you".

You might discover that "what you need differs massively".