15 May 2025
5 min
Pension adequacy remains a critical concern for many individuals planning their retirement. One key question is whether members will still be paying housing costs. This is a key factor that can make a big difference to how far pensions will stretch.
The Pensions and Lifetime Savings Association (PLSA) provide guidance through their Retirement Living Standards (RLS), which outline the levels of expenditure required to achieve different standards of living in retirement.
The RLS, launched in 2019, helps members understand how much money they'll need when they retire and what standard of living that will provide. They are categorised into Minimum, Moderate, and Comfortable standards, based on a "basket of goods" approach that reflects the cost of goods and services typically purchased during retirement. The 2024 update reflected changes in the cost of living, particularly significant food inflation and rising energy costs. This led to substantial increases in the Standards, especially the Moderate RLS, meaning members would need to contribute more or work longer to maintain the same standard of living.
For those planning their retirement, the PLSA provides clear guidelines:
For a Minimum standard of living, you'll need £14,400 per annum.
For a Moderate standard, which offers more financial security and flexibility, you'll need £31,300 per annum.
For a Comfortable standard, which allows for more financial freedom and luxuries, you'll need £43,100 per annum.
We've incorporated the latest RLS guidelines, market conditions up to March 2025, and the increase in the annual state pension into our latest analysis. Using our Guided Outcomes™ model, we categorise the likelihood of meeting the RLS for various combinations of salary and total contribution rate with a red/amber/green colour scale. This model helps members assess their chances of achieving their desired standard of living in retirement.
Our analysis shows that members who contribute regularly over their working life have a very good chance of achieving the Minimum standard of £14,400 per annum, assuming they are entitled to the full State Pension. However, most people will aim for a higher standard of living. A significant assumption in the RLS is that members do not pay housing costs during retirement. For those who do, the adequacy of different combinations of contribution rate and salary must be reassessed. This consideration is crucial for members with lower incomes who may continue to pay rent throughout their retirement.
Our call to action for trustees, providers, and employers:
Help members set a retirement income target. This can be a powerful way to improve engagement, and the RLS offers a useful framework for setting targets aligned with likely spending patterns.
Help members understand their State Pension entitlement and how it affects the personal pension savings they’ll need for retirement.
Give members the tools to track their progress against their target, and the insight to know what actions they can take to improve their retirement outcomes.
Most importantly, communicate clearly and regularly. Too often, pensions are seen as complex or distant concerns. But with the right tools and guidance, members can gain confidence in their financial future. Trustees, providers, and employers each have a vital role to play beyond just managing pensions. They can empower savers to make informed, timely decisions.
Download our publication to learn more. Or for more information on DC pension adequacy and improving member outcomes, get in touch with us today.
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