UK Population Boom: The Impact on Retirement

The latest figures from The Office for National Statistics (ONS) revealed Britain’s population could skyrocket in the next few years.

The figures, based on current and past trends, were used by the ONS for population projections. Over the decade from 2022, net migration is expected to add 4.9 million people to the UK’s population, taking the total from 67.6 million people in mid-2022 to 72.5 million people by mid-2032.

The data, released on Tuesday, assumes net migration will average around 340,000 a year from mid-2028, which is actually lower than current levels. With natural births and deaths currently cancelling each other out in the UK, this population growth will come almost entirely from migration.

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James Robards, from the ONS, said: “The UK population is projected to grow by almost five million over the next decade. The driver of this growth is migration, with natural change – the difference between births and deaths – projected to be around zero.”
“Our latest projections also highlight an increasingly ageing population, with the number of people aged over 85 projected to nearly double to 3.3 million by 2047. This is in part because of the ageing of the baby boom generation, as well as general increases in life expectancy.”

An ageing population

As highlighted by Robards, the UK has what’s known as an ‘ageing population’, where a country has the number of older, often retired people, increasing relative to the number of younger, often working age people. The further this ratio increases, the greater the strain on the healthcare system and Government services like the state pension as the working population struggle to support the expanding older age groups.

While the increase in working age migrant workers will take some pressure off in the short-term, the gap continues to grow. That is why it is essential to not rely solely on your state pension, especially with the age of retirement continually being pushed higher in an attempt to take pressure off Government services.

Below are some of the different ‘levels’ of retirement, highlighting just how important it is to have a strong private pension if you want the maximum freedom after you retire. 

What is a ‘good’ retirement?

In the UK, retirement living standards are commonly categorised into three levels: Minimum, Moderate, and Comfortable. These benchmarks, developed by the Pensions and Lifetime Savings Association (PLSA), help individuals plan for retirement by outlining the annual income required for each lifestyle.

• Minimum Retirement Living Standard

This level covers essential needs, including housing, food, and utilities, with some allowance for social activities. As of 2024, a single person requires an annual income of £14,400 to achieve this standard. The full new State Pension provides £11,502 per year, leaving a shortfall of £2,898 to be covered by private pensions or other savings. 

• Moderate Retirement Living Standard

This standard allows for a more comfortable lifestyle, including a car, occasional holidays, and increased spending on leisure activities. A single person needs an annual income of £31,300 to maintain this lifestyle. After accounting for the full State Pension of £11,502, an additional £19,798 per year is needed from private pensions or savings. 

• Comfortable Retirement Living Standard

This level supports a more affluent lifestyle, with extended travel, higher quality food and clothing, and increased spending on hobbies. A single person requires an annual income of £43,300 for this standard. With the State Pension contributing £11,502, the remaining £31,798 must come from private pensions or other savings. 

It's important to note that these figures are based on the PLSA's Retirement Living Standards and are subject to change with inflation and personal circumstances. Additionally, the actual amount received from the State Pension depends on an individual's National Insurance contributions. Therefore, it's advisable to regularly review your retirement plans and consult with a financial adviser to ensure your savings align with your desired retirement lifestyle.

If you want to find out more about how you can navigate your retirement, why not give us a call on 0333 323 9065 or book a free non-committal initial consultation with one of our chartered advisers to find out how we might be able to help you.

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The Financial Conduct Authority (FCA) does not regulate tax and cash flow planning.

This article is intended for general information only, it does not constitute individual advice and should not be used to inform financial decisions.