Rising retirement costs in the UK means that pension savers will have to invest around £500,000 for their later years.

Retirement income specialists MGM Advantage have found that twenty years of retirement will cost the average household £564,227, following research into standard costs of living and average household expenditure in regions across the UK.

The amount savers in London need to put by for retirement is the highest in the UK at over £600,000 – more than £30,000 for every year if someone retires at 65 and lives until the age of 85.

Wales was shown to have the cheapest cost of living, meaning a retirement fund of £499,178 would be needed to cover 20 years of retirement. And according to the figures, the North and North West were also among the cheapest places to retire.

Pension fund estimates began to rise in the south of England, with the South East and London topping the table estimating that pension saving pots need to contain well over £600,000 to sustain a decent retirement.

MGM Advantage also said that despite the “huge and growing cost of living in retirement”,  a number of factors, including longer life expectancy, the effects of quantitative easing and new regulation, will see standard annuity rates fall by as much as 20 per cent over the next few years.

Chris Evans, chief executive, MGM Advantage comments: “There is significant pressure on pensioner income. Those people retiring today can expect to live for twenty years but with annuity rates falling and the cost of living rising, funding retirement is a difficult task. 

“With such large regional discrepancies in the cost of living in retirement, we wouldn’t be surprised if more people considered relocating to other less expensive parts of the country in order to search out a better quality of life.  They also need to spend more time on ensuring that their retirement income is working as hard as possible for them.”

According to MGM Advantage traditional annuities, with their rates falling, are becoming less appealing for those people approaching retirement or who have already stopped work. 

They also believe that the increased cost of living highlights the need for retirement products that can protect income from the negative effects of inflation through a degree of market exposure and has called for ‘a radical change’ in the industry.

Chris Evans, added:  “The sums involved in covering the cost retirement are significant, and will be even higher for those people with big plans to fully enjoy their retirement, the first decade of which can be particularly expensive.”

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