From savings to a private pension, there are a number of ways in which a person may fund their retirement. This may also include the state pension, which can be claimed once the eligible person has reached state pension age. The full new state pension amount currently stands at £168.60 per week. Meanwhile, the full basic state pension £129.20 per week, with some people potentially qualifying for the Additional State Pension or a top-up amount if they’re married or in a civil partnership.
For a person who gets the full new state pension, this works out at around £8,767.20 per year.
However, according to figures from the Office of National Statistics, the average annual spending for a one-person retired household is £13,265.20.
Crunching the numbers, this leaves a gap of £4,498 per year.
An analysis by Just Group has suggested that, should the amount be paid from January 1 at the average expenditure rate, yesterday would be the day at which they would have to start relying on their own funds.
However, the state pension is worked out in weekly amounts, and paid in arrears every four weeks.
Stephen Lowe, group communications director at Just Group, said: “The average retiree given their whole year’s state pension on January 1 would run out this week and have to start relying on their own funds.
“Of course, the state pension is paid weekly so it is spread over a year.
“But the date does help highlight that what the State provides each year is about four months or £4,500 short of what the average retiree spends each year, so it is important to build up other sources of income.”
When it comes to couples – assuming both parties receive the full new state pension – they would receive £17,534.40 on the state pension.
However, ONS figures suggest that retired two adult households have an average expenditure of £26,244.40 per year.
This works out at a shortfall of £8,710 per year, should they only rely on the state pension.
“The figures show the state pension remains the bedrock of retirement income for most pensioners, paying for about two-thirds of their annual outgoings on average,” Mr Lowe commented.
“They also show how important it is not to rely solely on the state pension, but to build up private pensions through a working life and use that money wisely during retirement.
“It’s a reminder that failing to save or opting out of a workplace pension scheme can leave people struggling for income in later life.
“It also highlights that those thinking of accessing pensions cash should think about what that might mean in a few years or decades time.”
Mr Lowe also pointed out that help regarding how a person can plan funding their retirement is available, urging people to access the service.
He said: “The Government’s Money and Pensions Service offers free, independent and impartial pensions help to those people approaching retirement and we’d urge people to take advantage of it.
“It’s easy to make an appointment that lasts around 40 minutes – not a lot of time to make sure 40 years of savings are used wisely.
“Those in retirement struggling for income should also find out what State Benefits they might be entitled to because large amounts go unclaimed.
“A good online source is direct.gov.uk but Citizens Advice and other charities might also be worth contacting.”
This article was first published on Wednesday August 28, 2019.