Pension: Claer Barrett shares tricks to maximise your state pension
Inflation has pushed up typical bills for pensioner households by nearly a fifth, leaving many older employees with no option but to delay retirement plans, financial experts warn.
The pension required to fund a modest lifestyle has surged from £10,900 in 2021 to £12,800 in 2022 (an increase of 18 per cent) for a single person and from £16,700 to £19,900 (19 per cent) for a pair.
Pensions expert Scott Gallacher of Rowley Turton said: “The recent cost-of-living crisis is having a significant impact on retirement plans, particularly for those within the ‘squeezed middle’.
“I even have seen first hand the consequences of this crisis, with clients postponing retirement by several years.”
Rising prices for food, fuel and energy brought on by the war in Ukraine pushed up bills most over the 12 months, says an inflation update by the Pensions and Lifetime Savings Association.
Its stark evaluation found that each one three retirement income standards – minimum, moderate and cozy – at the moment are dearer.
Number crunch…more couples are having to reconsider after they start drawing a pension
The moderate retirement income level has increased by 12 per cent, from £20,800 to £23,300 for a single retiree and by 11 per cent, from £30,600 to £34,000 for a pair.
And the income level for a snug old age has increased by 11 per cent for a single person (from £33,600 to £37,300) and 10 per cent (from £49,700 to £54,500) for a two-person household.
Last month’s Government figures showed six in 10 of those of their 50s and 4 in 10 of over-60s are considering going back to work due to growing financial pressures.
The disproportionate increase in the associated fee of retirement for those on minimum living standards means the Government’s commitment to the state pension triple lock – campaigned for by the Every day Express – is especially essential, the PLSA argued.
Nigel Peaple, director of policy and advocacy on the PLSA, said: “The past 12 months has been an enormously difficult one for a lot of households within the UK.
“Inflation has risen to its highest rate in 40 years with the associated fee of essentials and domestic fuel soaring, putting substantial pressure on incomes for working age and retired households – particularly for those on low incomes.
“These figures have underlined why the Government was right to extend the state pension consistent with the triple lock in its Autumn Statement.”
Phil Brown, director of policy at People’s Partnership, provider of the People’s Pension, said: “These revised figures from the PLSA are further proof, if needed, that few are immune from the cost-of-living crisis. Our own research has previously shown that through pension saving alone, only 18 per cent of the population would achieve a moderate standard of retirement.
“While 4 per cent would enjoy a snug retirement – and it is extremely likely that number has reduced in recent months.”
The minimum retirement income standard includes £96 for a pair’s weekly food shop, every week’s annual holiday within the UK, eating out about once a month and a few inexpensive leisure activities about twice every week, plus £12-a-week for wine. This level of income doesn’t include a budget to run a automobile.
A pair with a moderate living standard could spend £127 on the weekly food shop, have a two-week holiday in Europe and eat out just a few times a month.
The standards for retirees having fun with a snug lifestyle aspects in regular beauty treatments, theatre trips and three weeks holidaying in Europe per 12 months. A pair could spend £238 per week on food shopping. The increased cost of running a automobile with moderate and cozy living standards over the past 12 months has resulted on this element of the budget increasing, the PLSA said.
The standards and budgets are usually reviewed to maintain up with changes in people’s expectations of what retired households need along with price rises.
Emma Douglas, director of workplace savings and retirement at Aviva, sees some positive spin-offs for employers and employees from the negative of delaying plans. She said: “Pension pots that might need sustained a targeted living standard might now fall short.
“Employees approaching retirement without the pension pot they would really like could reduce their hours somewhat than fully retiring.
“This may very well be a win-win for employers and employees.
“Employers keep experienced staff and employees boost their pension contributions and are less reliant on their pension fund.”
COMMENT BY SAMANTHA GOULD
Double-digit inflation will erode pension pots over time, so those coming up for retirement are considering whether to proceed working.
High levels of inflation – particularly on necessities comparable to energy, food and fuel – are impacting people’s ability to pay bills.
This is especially detrimental to those on low incomes who spend their money on basic needs.
The Bank of England sets the UK base rate and is liable for keeping inflation at a stable level (goal 2.5 per cent).
The high inflation rate of 10.7 per cent in the mean time is something we now have not seen for 4 many years.
If persons are approaching retirement, given the present climate, now shouldn’t be the time to be telling them to place more cash into their pensions after they are faced with such pressures.
Nevertheless it continues to be essential to contemplate retirement plans.
The primary place to begin is your workplace pension and its auto-enrolment (AE).
It’s not only the saver who pays in, but additionally the employer – and there’s tax relief on top.
The issue with auto enrolment is that it was designed for traditional work patterns and shouldn’t be suited to assist those that take profession breaks, work in multiple or part-time roles, or ceaselessly move between jobs.
We’re calling on the Government for reform to be sure that the pensions system is maintaining with modern ways of working.
There are 8.6 million staff ineligible for AE.
But we want to be sure that everyone has the identical opportunity to save lots of for later life, so we want changes beneficial by the 2017 Automatic Enrolment review as soon as possible.
This could help people to be less depending on state pensions and get one other three million saving for his or her retirement.