A quarter of over-55s in the UK are financially unprepared for retirement and will have to rely solely on State Pension payments, a new study has revealed.
But what kind of retirement lifestyle can you expect on the State Pension alone? How can you boost your retirement income to ensure a more comfortable retirement? Let’s take a look.
How many over-55s have no pension pot?
According to a study involving 2,000 participants conducted by online personal storage platform myFRP and Censuswide, a significant number of UK’s over-55s potentially face a bleak financial future.
The study reveals that almost a quarter of them (23%) have no personal or workplace pension. This means that State Pension will be their only source of income in retirement. It’s a situation that affects men than women (21% vs 16%).
Another revelation from the study is that people working in sales and media are least likely to have a pension. Those in finance, IT and telecommunications are most likely to have one.
One piece of good news, however, is that a good proportion of people aged between 25-34 are likely to have a pension plan in place (only 12% do not). This indicates that more young people are becoming aware of the importance of planning and beginning to save for retirement from an early age.
What is worrying, however, is that only 27% of people keep track of their pension plans and investments. The main reason cited is that pension and insurance plans from employers are complex and hard to keep track of.
In fact, nearly a third (31%) of those who took part in myFRP’s study said that employers need to do more to make pension and insurance plans easier to access and track.
How much is the UK State Pension?
To be eligible for the UK State Pension, you need to make National Insurance contributions for a minimum of 10 years.
There are two main types of State Pension: the basic State Pension and the new State Pension.
The basic State Pension is available to both men and women who reached State Pension age before 6 April 2016. Currently, the full basic State Pension is £137.60.
Men born on or after 6 April 1951 and women born on or after 6 April 1953 can claim the new State Pension. The full new State Pension is currently £179.60 per week.
Not everyone receives the full amount. What you get depends on how many qualifying years of National Insurance contributions you have built up.
Is the State Pension enough to retire on?
Most experts warn that relying solely on the State Pension may leave you financially strained in your golden years.
While it can help cover some of your basic needs, it is unlikely to give you the retirement lifestyle you want.
According to research, a retiree would need an income of at least £10,000 to have a minimum standard of living. This amount will help cover basic needs, including shelter and groceries. It will also cater for eating out once a fortnight and the occasional takeaway.
But if you need to eat out more than twice a month, afford to run a car and go on a ten-night European holiday every year, you’ll need an income of between £20,000 and £30,000.
A retirement income of £40,000 will allow you to treat yourself to regular dining out and beauty treatments, as well as at least one long European holiday per year.
Even if you receive the full new State Pension rate, which is £179.60 per week, or £9,330 per year, it is insufficient to ensure a decent standard of living, let alone allow you to indulge in a few luxuries during retirement.
This highlights the critical importance of having alternative sources of retirement income.
How can I boost my retirement income?
Begin by researching how much money you will need to retire on. There are many online retirement income calculators to help you, such as the one offered by Fidelity International.
Formulate a plan on how to get there. This can include signing up for a workplace or a personal pension plan and maximising your contributions, or even investing in the stock market through a tax-efficient vehicle such as a stocks and shares ISA.
Remember that the earlier you begin saving, the larger your nest egg will be by the time you retire. This could translate into a more comfortable retirement.