Why you may need to save more for your retirement if you’re single

Single people may need to save more for their retirement than they realise. Find out why and learn three helpful tips for building a comfortable retirement fund.

It’s likely that saving enough for a long and comfortable retirement has been on your mind lately, especially during the current cost of living crisis.

Yet, if you’re single, you could face the toughest challenges when planning for your financial future.

Research by the Pensions and Lifetime Savings Association (PLSA; 12 February 2024), has revealed that single savers need an extra £160,000 for a “moderate” standard of living in retirement, compared to those in a couple. For a “comfortable” retirement, a single person would need an extra “£257,000”.

What’s more, singlehood is becoming increasingly common. According to figures from the Office for National Statistics (ONS; 8 May 2024), the number of people living alone in the UK rose from 7.8 million in 2013 to 8.4 million in 2023.

So, if you find yourself single – be that through choice, divorce, or widowhood – read on to learn more about saving for a single retirement and discover three helpful tips for accumulating the wealth you need.

Economies of scale: Why a single person may need to save more than a partnered person

Unfortunately, a single person’s costs are usually more than half the amount a partnered person would pay.

If you live alone, you’ll need to cover all the household expenses yourself, including mortgage repayments, utility bills, broadband, and home maintenance costs.

In contrast, a couple living together could share these costs and pay half each, reducing their individual outgoings significantly.

So, if you’re planning a single retirement, you’re likely to need more in your savings pot than someone who is married or cohabiting.

The study by the PLSA found that between them, a retired couple needs £59,000 a year to achieve a comfortable retirement, which equates to £1.8 million over a 30-year retirement.

In contrast, a single person would need around £43,000 to achieve the same standard of living – around £1.3 million over 30 years.

What’s more, the higher costs associated with living alone could also make it harder to save the funds you need for your desired retirement lifestyle. Fortunately, there are steps you can take to boost your retirement savings pot, which we will come to shortly.

If you’re a single woman, you may need an even bigger retirement savings pot than your single, male peers

According to the ONS life expectancy calculator, the average life expectancy in the UK for a 40-year-old woman is currently 87 years, compared to 84 years for a man of the same age.

This could mean that women have a greater “longevity risk” (the risk that a retiree will outlive their savings). So, as a single woman, you may need more in your savings pot to cover a lengthy retirement.

Unfortunately, the gender pay gap – which stood at 7.7% in 2023 according to ONS (1 November 2023), figures – may make this harder to achieve. This difference in the average earnings between men and women often has a knock-on effect on retirement savings. For instance, figures published by Legal & General (6 April 2024), show that the average UK pension pot for men over 50 is £84,205, compared to just £39,654 for women.

So, if you’re a single woman, you may need to think carefully about how to save for the retirement you desire. With the help of an experienced financial planner, you could feel much more confident about achieving the comfortable future you deserve.

Read more: Why divorce can play a major part in exacerbating pension inequality in the UK

3 helpful tips for building a comfortable retirement fund if you’re single

As you can see, being single could make it more difficult to save for a long and enjoyable retirement. Fortunately, the following steps could help you bolster your savings pot.

1. Consider increasing your pension contributions

In the cost of living crisis, you might feel that you have more immediate financial needs than boosting your pension pot. Yet, increasing your pension contributions is one of the most consistent, tax-efficient ways to save for your retirement.

Any savings you invest in your pension could benefit from the powerful effect of compound returns. In simple terms, compounding means earning returns on both your original investment and on returns you received previously. Over the years, this can help even modest investments grow.

What’s more, you could benefit from between 20% and 45% tax relief on your contributions, depending on your marginal rate of Income Tax. For example, if you are a basic-rate taxpayer, a £1,000 pension contribution only “costs” you £800 due to the 20% tax relief added at source. If you’re a higher- or additional-rate taxpayer, you could claim additional relief by self-assessing each year.

So, increasing your monthly pension contributions by even a small amount could significantly increase your retirement income.

To achieve this, you might want to explore the possibility of salary sacrifice with your employer. This allows you to reduce your pre-tax salary by the amount of additional pension contributions you want to make. In exchange, your employer pays this amount into your pension.

Not only is this an effective way to automate your increased contribution, but it could also offer various tax benefits.

2. Make the most of tax-efficient savings

While you might think of your pension pot as your primary retirement fund, combining this with your other tax-efficient savings and investments could help you accumulate the wealth you need for retirement.

Individual Savings Accounts (ISAs) are one of the simplest and most popular ways to save and invest outside of your pension.

As of the 2024/25 tax year, you can contribute up to £20,000 annually across most adult ISAs without paying Income Tax or Capital Gains Tax (CGT) on any interest or returns you accrue.

There are three main types of adult ISA:

• Cash ISA – These function similarly to a regular savings account, with the added benefit of tax-free interest earnings.
• Stocks and Shares ISA – These accounts allow you to invest your wealth without paying any CGT or Income Tax on your returns.
• Lifetime ISA (LISA) – With contributions capped at £4,000 a year, forming part of your overall ISA allowance, the LISA has two functions: buying your first home, or saving for retirement. Any money you save within your LISA receives a 25% top-up from the government, but crucially, you can’t access your pot tax-efficiently until you are 60 unless you’re using it to buy your first home. And, you must be 40 or under to set up your account in the first place.

Whichever way you choose to use your annual ISA allowance, making the most of this tax-efficient option could help you build up a flexible source of later-life income.

3.  Build a strong investment portfolio

Investing your hard-earned money may feel intimidating and “risky” compared to the “security” of holding cash savings. This might be especially true during periods of market volatility. Indeed, factors such as the ongoing cost of living crisis and global elections have led to market uncertainty in 2024.

However, investing could potentially deliver higher returns than cash savings over the long term. This is because the real-terms value of cash may be eroded by inflation over time, whereas investments could benefit from compound returns that grow your wealth in line with, or faster than, inflation.

The graph below shows the percentage chance of beating inflation with cash savings and shares over different time frames.

Click here to view

Source: Schroders

As you can see, shares consistently outperform cash savings. What’s more, the likelihood of stock market investments beating inflation increases the longer you keep your money invested.

So, while it’s essential to keep some cash for short-term costs and emergencies, creating a strong investment portfolio could be an important part of your retirement plan, especially if you’re saving as a single person.

Of course, past performance is not a reliable indicator of future performance, and there’s usually a risk of capital loss associated with investing.

If you’re uncertain about starting to invest or unsure how to grow your existing portfolio, I can help. Together, we can create a diversified portfolio that effectively balances risk and helps you progress towards your retirement savings goals.

Get in touch

I have extensive experience supporting single clients in creating the financial future they desire, whatever their circumstances and aspirations.

So, if you’d like to find out more about how I can help you accumulate the wealth you need for a fulfilling single retirement, please get in touch by email lottie@truefinancialdesign.co.uk or call 07824 554288.

Please note

This article is for general information only and does not constitute advice. The information is aimed at retail clients only.

Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.

A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future performance. 

The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates, and tax legislation may change in subsequent Finance Acts.  

Workplace pensions are regulated by The Pension Regulator.

The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance. 

Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.