High inflation means pensioners will need extra £90,000

The current high level of inflation, with the consumer price index hitting 10.1 per cent in July, means pensioners may need to increase their withdrawals by £2,000 annually to maintain a comfortable retirement, and £3,000 to preserve a “luxurious lifestyle”.

Online pension provider PensionBee has modelled the impact inflation will have on retirement portfolios, saying that the average retiree required an annual income of £19,000 to maintain a comfortable lifestyle, which is an overall pot size of £330,000.

This is assuming an annual growth rate of 5 per cent, and 0.5 per cent in fees.

However, rising inflation has pushed that up to £21,000, adding £90,000 to the total required pot size, with those wanting a more luxurious lifestyle needing £3,000 more, or £34,000 a year.

PensionBee chief executive Romi Savova said this modelling highlights the “real impact” of high inflation on pension savers, especially those who are already withdrawing from their pensions.

“Despite the alarming numbers, we want to reassure savers that it’s possible to increase the value of their pension by following a few simple steps, without needing to increase their contributions at a time when finances are already tight,” she noted.

The modelling assumes inflation will have reached an average of 10 per cent in 2022 and 2023, 5 per cent until 2028 and 2.5 per cent for the next 13 years.

This article originally appeared on FTAdviser.com