Is a State Pension enough?

The State Pension is an important part of retirement income in the UK. However, if you only have the State Pension, you may find that it’s not enough to live on.

It can help with essential costs such as food, energy and day-to-day living. And because it rises each year, it helps your income keep pace with the rising cost of living.

Housing costs, running a car, holidays, or helping family members, are examples of expenses that often require additional money that the State Pension may not cover.

Researchers at Loughborough University have created the Retirement Living Standards, which help people picture what different lifestyles in retirement might cost. The figures estimate how much someone may spend in retirement across three different living standards.

They focus on how much you can expect to spend, not the income you’d need. They assume you own your own home with no mortgage, so you may need to add or reduce other costs, such as mortgage or rent. Also remember, any income above your personal allowance may be taxed, so plan for that too.

The standards aim to offer a clear and realistic view of people’s retirement spending in the UK, helping you use your current lifestyle and cost of living as a guide for what you might need in the future. The figures can be shown using two different options: ‘two-person’ household for those living with another person and having a joint expenditure, or a ‘one-person’ household for those living alone on one income.

Within the spending categories, the specific breakdown of costs and how they are shared will vary from household to household.

The State Pension is helpful, but it’s not designed to be the sole source of income in retirement for most people. In the worst-case scenario, if your total pension income is very low, for example, because you don’t have enough National Insurance Contributions for the full State Pension or didn’t have a workplace or personal pension, you can apply for Pension Credit, which could top up your income a little.

For many people, a comfortable standard of living in retirement requires more than just the State Pension. This could come from workplace pensions, armed forces pension benefits, private or personal pensions, or cash savings and ISAs.

If you are serving or have served in the armed forces, you will normally build up pension benefits through the Armed Forces Pension Scheme, which we’ll cover in more detail in a separate video. If you are a spouse or partner, you may build up retirement income through civilian workplace pensions, personal pensions, or savings.

When you’re thinking about how to plan for retirement, there are many options to consider. The important thing is starting early. Even small amounts can make things easier later on and give you more options when you stop working.