Is a State Pension enough?
PensionsLearn why the State Pension alone isn’t enough and how extra savings can help you afford the retirement lifestyle you want.
Transcript
If you only have the State Pension, you may find that it’s not enough to live on. The State Pension can help with essential costs such as food and energy, and the fact that it rises each year is also valuable in helping your income keep pace with the rising cost of living.
But a State Pension is unlikely to cover housing costs, holidays, running a car or helping your family. Researchers at Loughborough University have developed retirement living standards to help individuals picture what kind of lifestyle they could have in retirement and the costs involved. 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 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.
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 full State Pension or didn’t have a workplace or personal pension, you can apply for pension credit, which will top up your income a little. However, many people will find that to have a comfortable standard of living, they will need income from workplace pensions, private pensions, individual savings accounts, also known as ISAs, or cash savings, in addition to State Pension.
So, in order to secure a more comfortable retirement, it’s best to start making contributions to a personal pension or savings account. This savings pot, plus your National Insurance contributions, will mean you can live well when you stop working. Remember to start early, and even small contributions can make a big difference in the long term.
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All Adult Learning Modules
Budgeting
Module 1
In this module, you’ll explore how budgeting can help you plan ahead and manage the impact of rising costs.
Earnings
Module 2
In this module, you’ll learn how to understand your pay, spot any issues early and explore the different ways you can increase your income.
Freelance
Module 3
In this module, you’ll learn what freelancing involves, from getting paid to managing tax, expenses and day-to-day responsibilities.
Pensions
Module 4
In this module, you’ll explore how pensions work, from the State Pension to workplace and personal pensions, so you can plan ahead.
Debt
Module 5
In this module, you’ll learn how borrowing works, how to manage debt responsibly and where to get help if it becomes hard to handle.
Credit
Module 6
In this module, you’ll learn how credit works, different types of credit, how repayments are made and how interest and fees are calculated.
Mortgages
Module 7
In this module, you’ll learn how home buying works, the factors that shape affordability and how mortgages influence the overall cost.
Investing
Module 8
In this module, you’ll learn how investing works, how to manage risk and how to grow your money over time.
