The cheapest and priciest places to retire

A new study from equity release adviser Key has crunched the numbers on just how much it costs for people to get by once they pack up work.

They dug into data from the Office for National Statistics, which covered what households of different ages spend on the essentials, like food, clothes and bills.

And it found that the average retiree needs to shell out £11,830 each year just covering the necessities.

That works out at the best part of £230 a week.

Pension shock facing hundreds of thousands at retirement age

Where does that money go?

The biggest spends go on utility bills – which covers gas, electricity and water – and food. Both account for around 20% of the annual spend of a retired person.

That’s almost £2,400 a year.

Transport is also a big factor, making up around 16% of the typical outlay.

The regional difference

Of course, it’s worth remembering that this is just the overall average figure. There are some massive regional differences too.

In the South East for example that annual cost rockets to £14,270, the equivalent of £274.40 each and every week.

Retirees in the South West and London need to pay out more than £13,000 too, yet head over to the west midlands and the annual costs drop down to little more than £10,000.

Here is how the different regions shape up according to Key.

Relying on the state

It’s worth noting that even in the cheapest areas, the state pension is not going to be enough to cover the cost of necessities on its own.

The full basic state pension is worth a maximum of £168.60 per week. So if you retire in the west midlands, you’re still going to face spending an additional 17% just on life’s essentials.

Meanwhile, in the South East and South West you’ll need to shell out upwards of an additional 50%.

Given the fact that the current State Pension – and the way that increases to it are guaranteed through the triple lock – is already looking increasingly unaffordable, it’s another stark reminder that all of us are going to have to make at least some private pension provision to ensure that we have some level of comfort in retirement and are not forced to count the pennies.

If you're already in retirement and feeling the pinch, there are thankfully numerous steps you can take to boost your income. You should also make sure you're making use of any perks and benefits you're entitled to.

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Tapping into your housing equity

That’s all well and good if you’re young enough to do something about your substandard pension planning, but if you’re already in your later years then you might need to think about other options.

Equity release is becoming more popular with older people, and it’s easy to understand why. A lifetime mortgage essentially lets you unlock a percentage of the equity you have built up in the property, with no monthly repayments.

Instead, the loan – and the interest on it – gets paid off when the house is sold after you die or move into long-term care.

According to the Equity Release Council, the industry’s trade body, just under 44,000 equity release plans were taken out in the second half of last year.

That’s up by almost a quarter on the year before, with more than £1 billion of housing wealth released in both quarter three and quarter four of 2018.

While it would be unfair to say all older people are sat on huge housing wealth, it’s true that a substantial number have done very well out of rocketing house prices and are well placed to use equity release to boost their finances.

That said, it’s not something that should be undertaken lightly.

You need to get advice from a broker before taking out an equity release plan, while it’s also important to discuss it with any loved ones as doing so may reduce – or even eliminate – any inheritance they may have been expecting.