Do you know how much money you need to live comfortably in the UK? Most people don’t.
And that’s understandable because it can get very complicated very quickly. Are you single or do you have a partner? Do you have kids? And if so how many? Where do you live and what kind of lifestyle do you lead?
The fact that however much we have never seems like enough is also a problem.
In other words, it’s not easy. Not by a long shot. But this week we’ll have a crack at getting to the bottom of this topic once and for all.
Sure, this is written for expats thinking about returning to the UK, but hopefully anybody living in Britain should find it useful.
We give you five standards of living for six sizes of family and then do it all over again for London.
Just one little piece of housekeeping before we get into it. There are a lot of numbers in a lot of tables this week. Unless we say they are monthly, you can assume they are yearly and all of them are in thousands.
In other words, if it say 7 is means £7,000 and if it doesn’t specifically say per month it means per year.
Let’s get into it.
How much do you need for retirement in the UK?
Let’s start by taking a look at retirement. And that’s because that’s where we find the best idea of how much money we need to fund different levels of life style.
You see some nice people over at the Pensions and Lifetime Savings Association (PLSA) have done the hard work so that we don’t have to.
They’ve come up with three sizes of retirement living standards to aim for in the UK.
These are:
- Minimum
- Moderate
- Comfortable
Minimum
Not only are basic requirements all covered with the ‘minimum lifestyle’, but you’ll also have a little remaining for having a good time and socialising.
It includes for a UK holiday, monthly eat outs and a couple of leisure pursuits a week.
Moderate
With a ‘moderate’ lifestyle you get more financial security and flexibility. You’ll have money to do more of the things you want including eating out multiple times a month, foreign holidays and more leisure activities.
Comfortable
Comfortable brings luxuries into the mix, multiple foreign holidays and the freedom to be more spontaneous with your money.
Annual retirement targets
| £ / thousands | Single | Couple |
| Comfortable | 37 | 55 |
| Moderate | 23 | 34 |
| Minimum | 13 | 20 |
Now, these numbers are a great start, but they aren’t perfect by any means.
In fact, for most people of working age they have some gaping holes.
And these are:
- After tax
- No children included
- Outside London
- Assume you live in your own mortgage free house
In other words they don’t quite cut the mustard for us!
But no worries, because we’ve found ways to take account of all of the above.
How much UK tax will I pay in retirement?
How much tax you pay in retirement is another one of those questions that is almost impossible to answer accurately. But there is a method of coming up with a good enough starting point quickly.
You see, there’s a rule of thumb that says assume 30% before retirement age and 20% afterwards.
The difference is based on the fact that you need to pay national insurance before the official retirement age.
Though not a perfect solution for everybody it will provide a good enough gestimate for most of us.
How much does it cost to raise a child?
On average retirees tend to spend less in retirement than they did whilst working. And, it seems there’s a major reason for this……… Little bundles of joy!
It turns out children cost money. Dare I say it, a lot of money! But hey they are more than worth it (most of the time!)
The key question then becomes how much do those little rays of sunshine end up costing?
Luckily for us the Child Poverty Action Group has done some in-depth research into this very question and come up with an answer. In fact, they’ve come up with two. One for single parents and one for a couple.
- Couple – £160K
- Single – £200K
I don’t think it makes good reading for either, but it’s worse for a single parents simply because your childcare costs increase.
In any case, these numbers are based on some serious research so they are probably as good as we are going to get.
Just know, they don’t include for University or private schools (ie the ones you have to pay for!)
Now, that doesn’t mean you can’t send your kids to either of the above. It just means you either need to sacrifice somewhere else or be rich (which we’ve covered later too).
Anyway, we can divide these numbers by 18 to get an idea of how much we will be looking to spend each year on children.
Another point worth mentioning is that additional children are cheaper than the first but not by much. The data suggests about 80% of the cost of the first one due to bulk buying.
In other words we get these numbers:
| £ / thousands | Single | Couple |
| First child | 11 | 9 |
| Additional children | 9 | 7 |
One last point, worth mentioning is the fact that as you go up the income levels you may expect that this would include spending more on your kids.
However, we found no research to support that.
So we’ve assumed kids cost the same whoever you are. In some cases this is likely to be correct, in others it may not be. (More of an adequate solution than perfection).
How much rent should I pay?
We are assuming people are renting or that you spend the same amount on rent as you would on the mortgage and expenses for your own house.
For sure, some people will want to buy a house and that’s fair enough, but the point is, you don’t have to. Renting is nearly always cheaper than buying.
Some people see their house as an investment but as we’ve talked about before, renting the property you live in and using excess cash to invest in either index funds or buy to let is often a better way to grow your wealth.
And when the renters reform bill comes into play the days of landlords being able to kick you out of your home without an extremely good reason will come to an end anyway. And this will get rid of another major reason for buying your own property.
So the question then becomes how much money do I need to put towards rent?
But as everyone knows that’s yet another one of those questions that could be just about anything.
So to come up with an answer we’ve used three sources of information.
First up is a study by the Josh Rowntree Foundation. This gives us a good idea what we need to pay to get minimum standard of accommodation.
Then we nipped across the pond to grab a study by the US Bureau of Labor Statistics which shows on average couples pay 1.4 times as much as singles for their accommodation.
And finally we go back to the to our original retirement standards to see that jumping up a lifestyle level typically requires about 1.7 times as much money than the level below.
Is it perfect? Hell no! But will it give most people a good number to work with. We think so.
UK survival
Now, up until this point, our incomes are based on those retirement living standards with some tweaking for housing, tax and children.
Whilst they are a pretty good base, they are dealing with the middle ground. That’s just to say they don’t cover basic or rich levels.
We’ve attempted to address both of those starting with absolute basic requirements.
The Department for Work and Pensions publishes Households Below Average Income (HBAI) statistics.
It includes what they describe as relative poverty thresholds.
If your income falls below them you would be considered to be in relative poverty.
The following table takes the weekly figures and multiplies them by 52 to provide a yearly number.
So in short, according to the UK government, I think we can assume that you would need at least the following amount to survive in the UK.
Annual UK incomes for survival
| £ / thousands | Single | Couple | Single + 1 child | Couple + 1 child | Single + 2 children | Couple + 2 children |
| Survival | 12 | 18 | 17 | 23 | 21 | 27 |
How much do you need for a basic life?
Those numbers are quite a bit lower than the ‘minimum’ lifestyle based on the retirement living standards.
And that’s because with ‘minimum’ standards there’s some money allocated for fun ie it includes for a UK holiday, monthly eat outs and a couple of leisure pursuits a week.
Here are those numbers:
| £ / thousands | Single | Couple | Single + 1 child | Couple + 1 child | Single + 2 children | Couple + 2 children |
| Minimum | 23 | 35 | 34 | 44 | 43 | 51 |
Financial needs for happiness
How much you need to be happy is perhaps the most difficult concept we’ll tackle today.
At the end of the day, happiness is subjective. We’ve all met supposedly rich people that are drowning in unhappiness, and supposedly poor people that are as happy as can be.
It is almost unanswerable!
But I think for most people, most of the time, it’s about having financial security and the freedom to do enough activities to make you feel happy.
Which suggests a ‘moderate’ lifestyle should provide most people with enough money to feel happy (enough).
Here are the numbers:
| £ / thousands | Single | Couple | Single + 1 child | Couple + 1 child | Single + 2 children | Couple + 2 children |
| Moderate | 41 | 60 | 52 | 69 | 61 | 76 |
Financial requirements for comfort
For most people ‘moderate’ is going to provide a reasonable life, but if you want even more security and flexibility and some luxury added into the mix then you’ll probably need a little more.
And that’s where the ‘comfortable’ level comes into play.
| £ / thousands | Single | Couple | Single + 1 child | Couple + 1 child | Single + 2 children | Couple + 2 children |
| Comfortable | 67 | 98 | 78 | 107 | 87 | 114 |
For sure, those incomes will look high to many people but at the same time there’s bound to be others thinking they are low.
And well, that’s understandable, because let’s face it, ‘comfortable’ and ‘rich’ aren’t the same by any means.
I want to be rich!
Ask somebody you think is rich if they agree and nine times out of ten they’ll say no. In the society we live in the concept of ‘never enough’ is a major issue.
Don’t tell me most millionaires don’t want to be multimillionaires and don’t tell me most of them don’t want to be billionaires and so on and so forth………..
Where does it really end?
The best we can do is take a practical approach with this one.
There’s a rule of thumb that says you need three times more than average to feel rich.
Again, this won’t satisfy everybody’s needs but it’s the perhaps the best thing we’ve got to work with.
According to the Pensions and Lifetime Savings Association 50% of UK employees will sit somewhere between ‘basic’ and ‘moderate’
So taking the number half way between the two gives our best guess at average. We can then multiply by three to give some idea of how much you need to be rich in the UK.
In other words, the fact that you personally might not feel rich because you want to live a billionaire lifestyle isn’t important to us!
Here’s what you need to be rich.
| £ / thousands | Single | Couple | Single + 1 child | Couple + 1 child | Single + 2 children | Couple + 2 children |
| Rich | 97 | 142 | 108 | 151 | 116 | 158 |
Putting it all together
If we stick all those numbers together we get a nice little summary of different income or salary levels to aim for.
| £ / thousands | Single | Couple | Single + 1 child | Couple + 1 child | Single + 2 children | Couple + 2 children |
| Rich | 97 | 142 | 108 | 151 | 116 | 158 |
| Comfortable | 67 | 98 | 78 | 107 | 87 | 114 |
| Moderate | 41 | 60 | 52 | 69 | 61 | 76 |
| Minimum | 23 | 35 | 34 | 44 | 43 | 51 |
| Survival | 12 | 18 | 17 | 23 | 21 | 27 |
Whilst those numbers cover most of the UK, they doesn’t include London. But don’t worry we’ve haven’t left it out.
What do I need for a life in London?
Now on the face of it, London is yet another tricky one because the closer you get to the centre the more expensive things become. I’m guessing it’s an almost logarithmic rise.
However, we can take a more general approach. That’s because according to Trust for London, based on their research it’s easy. You need 20% more in London on average. (Not perfect, but helpful enough for us).
So based on that here’s some numbers for London.
| £ / thousands | Single | Couple | Single + 1 child | Couple + 1 child | Single + 2 children | Couple + 2 children |
| Rich | 116 | 171 | 129 | 181 | 140 | 190 |
| Comfortable | 80 | 117 | 93 | 128 | 104 | 137 |
| Moderate | 49 | 72 | 62 | 82 | 73 | 91 |
| Minimum | 28 | 42 | 41 | 53 | 52 | 62 |
| Survival | 14 | 22 | 21 | 28 | 25 | 32 |
Breaking it down
By dividing by 12 we get the following monthly income levels to aim for.
UK cost of living per month / incomes levels outside London
| £ / thousands | Single | Couple | Single + 1 child | Couple + 1 child | Single + 2 children | Couple + 2 children |
| Rich | 8.0 | 11.8 | 9.0 | 12.6 | 9.7 | 13.2 |
| Comfortable | 5.6 | 8.1 | 6.5 | 8.9 | 7.2 | 9.5 |
| Moderate | 3.4 | 5.0 | 4.3 | 5.7 | 5.1 | 6.3 |
| Minimum | 2.0 | 2.9 | 2.9 | 3.7 | 3.6 | 4.3 |
| Survival | 1.0 | 1.5 | 1.4 | 1.9 | 1.7 | 2.2 |
UK cost of living per month / income levels London
| £ / thousands | Single | Couple | Single + 1 child | Couple + 1 child | Single + 2 children | Couple + 2 children |
| Rich | 9.7 | 14.2 | 10.8 | 15.1 | 11.6 | 15.8 |
| Comfortable | 6.7 | 9.8 | 7.8 | 10.7 | 8.7 | 11.4 |
| Moderate | 4.1 | 6.0 | 5.2 | 6.9 | 6.1 | 7.6 |
| Minimum | 2.3 | 3.5 | 3.4 | 4.4 | 4.3 | 5.1 |
| Survival | 1.2 | 1.8 | 1.7 | 2.3 | 2.1 | 2.7 |
The bottom line
So there you have it. Five levels of income for six family types for both London and the rest of the UK.
Are they perfect? No! Are they good enough to get an idea of what you need? For most people we think so!