Will your retirement budget stretch further in 2025?

 A basic retirement now costs a little less

Written in line with our editorial policy.

If you keep a close eye on the cost of living in your retirement, things may be getting just a little easier. That’s the message from the creators of the latest Retirement Living Standards.

Each year, the Retirement Living Standards (RLS) give us a snapshot of what different retirement lifestyles might cost. And the latest figures for 2025 show that those aiming for a no-frills retirement may need slightly less income than they did just a year ago. 

But for those with bigger plans, such as travel, dining out or home upgrades, the cost of maintaining a more comfortable lifestyle is still ticking upward.

What kind of retirement do you want?

The RLS were introduced in 2019 by the Pensions and Lifetime Savings Association (PLSA), working with researchers from Loughborough University. They outline three retirement lifestyles:

• Minimum. Covers essential expenses with limited room for extras.
• Moderate. A more balanced lifestyle with flexibility and some travel.
• Comfortable. A retirement with plenty of comforts like holidays abroad, dining out and helping family financially

These models are updated annually to reflect actual price changes and what retirees say they need. It’s important to note, however, that they assume people aren’t paying rent or making mortgage repayments, which isn’t always the case.

Basic retirement gets cheaper

The biggest change in this year’s RLS update is the fall in income needed for a ‘minimum’ standard of living:

• For a single retiree: £13,400 a year – a reduction of £1,000 on last year.
• For a retired couple: £21,600 a year – £800 less than last year.

This drop is largely due to lower domestic energy costs, which had spiked in recent years. Also, retirees in this category reported spending less on things like clothing, hairdressing, taxis and technology upgrades that had previously been included in the calculation.

If you’re living simply, with limited luxuries and careful budgeting, this might come as welcome news. But what if you have bigger aspirations for your retirement years?

Upward pressure on more expensive retirement lifestyles

While the essentials may cost a little less, retirees looking to live with more comfort will need a bigger annual income in 2025. The updated figures show small increases in the income needed to support more costly lifestyles, driven by inflation:

• Medium. Single £31,700 (up £400) and couples £43,900 (up £800).
• Comfortable. Single £43,900 (up £800) and couples £60,600 (up £1,600).

These income bands assume more spend on things like eating out, clothing and home maintenance. Therefore inflation has a bigger overall impact on these bands than it does for the Minimum band.

Mind the gap: the State Pension doesn’t always go far enough

The full new State Pension in 2025/26 is set at £11,973 per person. For a couple, it provides a joint income of £23,946, just enough to meet the Minimum income standard for two people. But the State Pension alone is clearly not enough to cover a Moderate or Comfortable lifestyle, and it leaves a shortfall even for single retirees aiming for the Minimum benchmark.

This financial gap will of course be met for many people by arrangements already in place. Income sources may include money from benefits, income drawdown, pension annuities, savings or investments.

But for those who don’t have enough in the way of income, all is not lost. Those who are ‘asset-rich but cash-limited’ may want to consider options such as downsizing, remortgaging or equity release.

When it comes to equity release, a lifetime mortgage could provide a solution by unlocking equity from your home to supplement income and achieve the retirement lifestyle you want.

Tailoring your retirement plan

No two retirements are the same. Your location, homeownership status, health needs and personal choices all shape how much you’ll actually need. While the Retirement Living Standards are a helpful reference point, they’re not a one-size-fits-all answer.

What they do offer is a useful starting point. They can help you understand what kind of lifestyle your current savings and pension income will support, and whether additional income from other means is needed to help you reach your goals.

Unlocking the wealth in your home

Whether you’re already retired or starting to plan for it, it’s important to understand the cost of your desired lifestyle. Just as importantly, it’s wise to get to grips with whether your pensions and savings will cover it. If not, why not look into options like equity release as a way to fill the gap between what you have and what you need?

If you are interested in exploring whether equity release can meet a shortfall in your retirement income, we are here to help. To learn more about how it works and whether it could be right for you, get in touch today for a personalised, no-obligation quote at the latest equity release interest rates.

Just call us on 0800 096 2215 or request a call back and we’ll arrange a no-obligation appointment with one of our selected equity release advisers for you. Or to get a quick estimate of how much you could unlock from your home, why use our free online equity release calculator.

About Richard Groom. A writer with 20+ years’ experience across several sectors including financial services, Richard has a passion for writing clear and simple content on even the most complex of subjects. In his spare time, Richard loves exploring the hills and mountains of the UK on long walks with his faithful cocker spaniel. Follow Richard on LinkedIn