Last week, the Joseph Rowntree Foundation released their latest report, scrutinising the 2015 Summer Budget, and examining whether older people will have better living standards by the year 2020.
The JRF has used the Minimum Income Standard (MIS) since 2008; it identifies what households feel they need – with weekly costs – for a minimum acceptable living standard. By looking at what some of these figures mean in real terms, we can devise exactly what is meant by an ‘acceptable living standard’.
While the report states that, thanks to the Summer Budget a pensioner couple should be £15 per week above the MIS by 2020 (up from the current standing of £10 under), what exactly does this mean in real costs?
All the figures below are weekly MIS costs for a pensioner couple in the UK:
Food – £72.69 / Alcohol – £7.80
Despite the approximate £314.99 per month food bill requirement, the average pensioner household’s annual food bill comes in at £1,563 (according to a study by Key Retirement Solutions) – £2,216 below the figures supposedly required for an acceptable standard of living.
Alcohol however, does seem low compared with food expenditure (£33.80 per month), particularly when taking into account Christmas and holidays.
Clothing – £12.33
This figure makes more sense when split over a year, at just under £650 (£641.16).
For a couple, this clearly isn’t a vast amount to spend: just over £320 per person every year. The MIS isn’t for extravagant living, but it should be acceptable to buy a winter coat or a new outfit for a special occasion should we want to.
Social and Cultural Participation – £55.87
This £55.87 a week seems a relatively small figure, though when you split it out over the year (£2905 or £242 per month), it isn’t a huge amount.
It’s certainly modest when it accounts for Entertainment and Recreation, UK Holidays, Leisure Goods and Christmas and Birthday Gifts, and a more than reasonable figure – we all deserve a holiday and to be able to enjoy Christmas and our loved ones Birthdays together, despite the associate costs.
Other costs include on the MIS include Rates and Housing (£142.14)m Household Goods and Services (£24.18), Personal Goods and Services (£32.28) and Travel costs (£11.15)
By investigating just a few of these categories, it gives us an interesting snap-shot, not just into how people define a reasonable standard of living, but what exactly that constitutes.
It isn’t expensive holidays, or indulgent shopping trips, but the more simple things: being able to afford a new pair of shoes; a short UK break; being able to participate in the societal rituals that surround Christmas and birthdays.
Thankfully, with the addition of private pension provisions, older people should be able to enjoy a comfortable pension above this acceptable standard of life after a lifetime of hard work.
The only anomaly we picked up on is the expected food bill, which was extremely high compared to the national average, even when including meals out – though when you’re retired, why shouldn’t you enjoy going out and meeting friends for dinner, or enjoying a leisurely lunch out during the week?
And while being £15 ‘better off’ than the MIS suggests you should be come 2020 doesn’t seem like a whole lot, bear in mind that as the current figures lies £10 below the MIS, it’s the equivalent to £1300 extra over the year: enough to pay for that UK holiday!
Ryan Smith writes on behalf of My Retirement Options, providing income drawdown guidance for those approaching their retirement.