Pension warning as millions risk being £2,643 short of basic retirement income

13 December 2023 , 12:49

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The state pension will rise by 8.5% next April (Image: Getty Images/500px Plus)

The full state pension is still £2,643 short of the basic income needed for a minimum standard of living in retirement - even after it rises next April.

Alice Guy, head of pensions and savings at Interactive Investor, has warned pensioners currently need £14,144 each year before tax. This is based on findings from the Pensions and Lifetime Savings Association living standards.

But the full new state pension is currently worth £10,600 a year. It will rise to £11,501 in April next year - meaning it will still fall short of what someone needs for a basic income. Just over a quarter (28%) of over 55-year-olds have no other pension saved and are completely reliant on the state pension, according to Interactive Investor.

Alice said: “Although the state pension is rising by 8.5% in April, it’s important to remember that it still falls far short of the amount needed for a basic retirement income.”

She continued: “Scrapping the triple lock would lead to millions of pensioners facing a poor old age, as the state pension is currently not enough for even the most basic of retirements. Many of today’s pensioners worked during a time of the pension haves and have nots, when not all workplaces offered a pension.

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“As a result, 28% of over 55s have no pension provision apart from the state pension. For pension savers who are still working, it’s important to know that the state pension alone won’t be enough for a comfortable retirement. To achieve a comfortable retirement you will need to supplement the state pension by saving into a workplace or private pension.”

The triple lock was introduced in 2010 and makes sure the state pension rises every April by whichever is highest out of: inflation (using the previous September rate of Consumer Prices Index inflation), wages (average growth between May and July), or 2.5%.

The highest of these for this year is average wages, which was confirmed to be 8.5%. You claim the new state pension if you’re a man born on or after April 6, 1951, or a woman born on or after April 6, 1953. The exact amount you will end up getting from your state pension depends on your National Insurance record.

Most people need 35 qualifying years on their National Insurance record to get the full new state pension, although some will need more than this, and ten years to get anything at all.

Levi Winchester