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State Pension: should I buy UK shares to retire in comfort?

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Retirement saving and pension planning
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It’s never been more important for Britons to take charge of their retirement plans. I’m doing this by buying UK shares. Annual State Pension rises have been failing to keep pace with the rising cost of living and social care for years now. The age at which Britons are eligible to claim state aid is also steadily climbing as the government struggles to balance the books.

The Covid-19 crisis has heaped even more pressure on the State Pension for the near term and beyond too. And as a consequence I plan to step up buying UK shares to protect my future.

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State Pension rises in danger?

Calls to scrap the ‘triple lock’ mechanism have grown significantly since the pandemic began to gut the economy last year. This is because the tool — which guarantees the State Pension will rise by the annual rate of inflation, the rate of average wage growth, or by 2.5% each year, whichever is highest — could cause benefit payments to balloon next April.

According to the Office for Budget Responsibility, rebounding pay packets during the current economic recovery could see the State Pension rise 8% next spring. It’s a figure which has led chancellor Rishi Sunak to suggest that the triple lock could be abandoned, at least for the time being.

The triple lock is the government’s policy but I very much recognise people’s concerns,” Sunak told the BBC on Thursday. He added that “we want to make sure the decisions we make and the systems we have are fair, both for pensioners and for taxpayers.”

It’s not just current pensioners and those on the brink of retirement that could suffer from a ditching of the triple lock. The huge strain that the ongoing public health emergency has placed on the country’s finances means that protections on State Pension rises could be slimmed down considerably. That’s my opinion at least.

A retired couple review their investing portfolio

Retiring in comfort with UK shares

It’s critical that Britons need to be aware of the rising dangers to the State Pension. But I don’t believe people need to be wringing their hands with worry. Why? Well saving a little each month to invest in UK shares can help those not only retire at a decent age and provide a decent standard of living. It can actually help people to retire in comfort.

A recent report from the Pension and Lifetime Savings Association (PLSA) showed that a single person will need to have built a pension pot of £599,667 to achieve a comfortable retirement. That would allow someone to receive an annual income of £33,000 (when combined with the State Pension) if that pot is used to purchase an annuity.

That’s quite a hefty sum, sure. But the historical rates of return that stock investing can provide can make this a reality. The average long-term UK share investor gets an average return of 8% each year, studies show. This means that a 30-year-old investing £262 a month could realistically expect to hit that magic £599,667 figure by the time they reach 65.

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Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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