State pension ‘not enough’ to retire on says financial advisor
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The value of the state pension has been the subject of much debate in recent times, particularly as the triple lock policy was suspended for the 2022/23 tax year. A set of living standards has shown that the state pension is not enough to live on.
The Pensions and Lifetime Savings Association (PLSA) have previously published retirement living standards, which lay out roughly how much income Britons will need to afford their desired retirement.
The standards, based on research from Loughborough University, have recently been updated to provide a more accurate picture for the current retirement landscape.
There are three different tiers to the standards, showing what retirement would look like at a ‘minimum’, ‘moderate’ and ‘comfortable’ level.
The cost of each of these tiers is provided for both single pensioners as well as those in a couple, along with details of the kind of lifestyle each level of income would provide.
According to the standards, even the maximum amount of state pension available may not be enough for some people to afford a basic retirement.
The new full state pension is currently worth £179.60 a week, which means a yearly income of £9,339.20.
However, according to the PLSA, a single pensioner would need £10,900 per year in order to achieve a ‘minimum’ retirement lifestyle.
That means a single pensioner receiving the full state pension would be £1,560.80 short, or 14.32 percent.
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Someone who retired and lived for another 20 years would therefore need to save an additional £31,216 towards their own retirement just to get by.
This emphasises the need for people to take their retirement prospects into their own hands, as the state pension alone may not be enough to support them.
The ‘minimum’ lifestyle is described by the PLSA as one which “covers all your needs, with some left over for fun and social occasions.”
At this level of income, the PLSA say Britons could “holiday in the UK, eat out about once a month and do some affordable leisure activities about twice a week.”
Fortunately for couples, the picture is a little sunnier. Two full state pensions would be enough to maintain a ‘minimum’ lifestyle for a retired couple.
Two full new state pensions would add up to £18,678.40, with the PLSA calculating that a couple requires £16,700 at minimum.
However, not everyone will receive the full new state pension, as the exact amount people get is based on their NI contributions.
Furthermore, people on the basic (old) state pension, which applies to those who reached state pension age before April 6, 2016, could be even worse off.
This is because the full basic state pension is just £137.60 per week, which provides a yearly income of £7,155.20.
At that level, a pensioner would not have enough money to achieve a ‘minimum’ standard of living, regardless of whether they were single or in a couple.
The state pension increases each year to help retirees keep up with the cost of living, but the most recently announced increase is at risk of being dwarfed by inflation.
An increase of 3.1 percent will come into effect from April 2022, boosting pensioners’ weekly income, but due to the financial fallout of the COVID-19 pandemic, inflation has soared and is currently at 5.1 percent.
That is the highest mark since September 2011, and during these uncertain times, it may be more important than ever that people secure their financial futures, especially when it comes to their retirement.
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