State Pension

In more recent years, British pensioners appear to have been getting an increasingly better deal from the State Pension – but is it really enough to completely rely on later in life?

For the majority of British retirees, the State Pension builds the foundation of their retirement income, and for the last decade it was guaranteed to increase annually, either wages, inflation or 2.5% because of the triple lock. In the past 10 years wages have remained stagnant and inflation have seen historic lows. This overall has been a great deal for pensioners – and next year will bring another increase of 2.5%.

Back in April, the newly introduced flat-rate State Pension for people who reached State Pension age after April 2016, increased by £4.40 up to £179.60 a week (£9,339.20 a year). The old basic State Pension, for people who hit State Pension age before April 2016, increased by £3.35 up to £137.60 per week, or £7,155.20 a year. Pension advisor near me.

Due to the coronavirus pandemic earlier this year, forecasters further predict that those who receive the State Pension may be in line for an even bigger state pension boost in 2022, with an additional 4.1%.

Inflation is crawling along at less than 1%, like has for the past 10 years, meaning those who receive the State Pension are seeing their cash increase by more than the price of services and goods are going up. So, does all this mean that Brit savers should now stop paying into their private pensions and just simply rely only on the State Pension? That’s a no!

The PLSA (Pensions and Lifetime Savings Association) has calculated for a basic retirement a single person needs a minimum of £10,200 per year or £15,700 for a couple. This would provide the basics to cover essential needs, plus a little left over for some fun. Obviously nothing crazy where the fun is concerned, perhaps for example, a UK holiday, eat out about once a month and maybe undertake a few affordable leisure activities twice each week. But that is nearly £1,000 a year above what the new full State Pension will provide to a single person. For those in receipt of the old basic State Pension, the shortfall is far greater at £3,000 a year.

The better news is that as part of a combination of the State Pension and some workplace or private pensions, the PLSA’s basic retirement income figure should be achievable for the majority of people.

What we all truly hope for in our work-free years is to retire in some sort of comfort and style. For that to happen, you will need more income than the basic State Pension! For a relatively moderate lifestyle in your retirement – perhaps a 2 week holiday somewhere sunny in Europe and to eat out a couple of times each month – you will need somewhere around £20,200 per year or £29,100 for couples.

At an even greater comfort level – perhaps regular beauty treatments, theatre trips and a glorious 3 weeks in Europe a year – a single retiree would need £33,000 a year and £47,500 for couples. These figures will obviously vary though, everyone is different and your choices will results in different costs. A recent Which? survey found retired households spent on average £2,110 each month, totally £25,000 a year, with the basics coming in at £17,200.

Luxuries such as long-haul flights and a shiny new car every 5 years bumped up the overall figure in the survey to a yearly £40,000 income – a very long way from the £9,300 per year that the basic State Pension will provide you with. You may believe you are quite frugal now and perhaps won’t mind a retirement that lacks certain luxuries. But remember, we are all now living much longer than ever before. A 30 year retirement isn’t just a pipe dream, and three whole decades is quite a long time to be fretting and counting the pennies.

The State Pension is no doubt a great foundation for your retirement savings, but you will need to increase its value with your own private savings to fully enjoy a really comfortable retirement.

Similar Posts