Understanding DC pension adequacy
Pension adequacy is still a big concern, especially for low earners.
Housing costs could be the key factor that makes or breaks meeting even the Minimum standard in retirement.
The Pensions and Lifetime Savings Association (PLSA) provide guidance through its Retirement Living Standards (RLS), which outline the levels of expenditure required to achieve different standards of living in retirement.
The RLS, launched in 2019, helps members understand how much money they'll need when they retire and what standard of living that will provide.
They are categorised into Minimum, Moderate, and Comfortable standards, based on a "basket of goods" approach that reflects the cost of goods and services typically purchased during retirement.
The latest June 2025 update reflects a reduction in the cost of achieving the Minimum standard, while the Moderate and Comfortable standards have increased slightly.
For those planning their retirement, the PLSA provides clear guidelines:
- For a Minimum standard of living, you'll need £13,400 per annum.
- For a Moderate standard, which offers more financial security and flexibility, you'll need £31,700 per annum.
- For a Comfortable standard, which allows for more financial freedom and luxuries, you'll need £43,900 per annum.
Assessing your chances of meeting the RLS
We've incorporated the latest RLS guidelines, market conditions up to March 2025, and the increase in the annual state pension into our latest analysis.
Using Hymans’ Guided Outcomes model, it categorises the likelihood of meeting the RLS for various combinations of salary and total contribution rate with a red/amber/green colour scale.
This model helps members assess their chances of achieving their desired standard of living in retirement.
Our analysis shows that most members who get the full State Pension are on track to reach the Minimum Retirement Living Standard of £13,400 a year.
However, housing costs remain a significant barrier for lower earners in determining whether or not they achieve the Minimum standard.
Simply paying rent in retirement could seriously reduce someone’s chance of reaching even this basic standard, especially for lower earners or those contributing less.
For average earners, a realistic goal may sit somewhere between the Minimum and Moderate standards, but they will need to pay in more to have a fair shot at the Moderate standard.
Meanwhile, the Comfortable standard is out of reach for most.
Find out more by downloading the Understanding DC pension adequacy (June 2025) report.
Supplied by REBA Associate Member, Hymans Robertson
We're one of the longest established independent consulting and actuarial firms in the UK
