Today marks the ‘state pension shortfall day’ whereby spending power of the average pensioner couple surpasses the full annual state pension, Just has highlighted.
According to official figures from the Office for National Statistics, the full annual state pension for a retired couple is £16,593, which covers just over three-quarters of the average retired couple’s annual spending, £21,700. Resultantly, the full state pension is enough to cover spending until 6 October, ‘state pension shortfall day’.
The shortfall is a significant £5,177 a year, meaning retired couples will need to utilise income from private pensions, savings and investments for the remaining three months.
Just group communications director Stephen Lowe noted that the state pension provides about three in every four pounds that the average couple has available to spend over the year. Therefore, for couples receiving the full state pension, of which many won’t, around £5,000 of income will have to be generated from other sources, Just found. As a result, this brings to light the necessity for people to save into workplace and private pensions and achieve savings that they can fall back on, Lowe commented.
With these findings, Just is emphasising the need for savers to guarantee sufficient savings accrual for retirement, so they are not reliant on the state pension, which is not enough to fund the average lifestyle and needs. In addition to this, Just has encouraged savers to start planning for retirement well ahead of the pensionable age and to take advice, for example from the government’s free service Pension Wise.
Furthermore, Just has voiced concerns that the rising numbers of savers accessing their pensions early may not be aware of the long-term implications of this if they do not have sufficient funds.
“Pension saving requires resilience and patience, paying in over many years and leaving the money invested, to grow until it is needed.” Lowe said.
Just revealed that of those accessing their pensions, seven in 10 are younger than 65 and around 60 per cent are taking full cash withdrawals.
“That’s fine if they have other sources of capital or income, but many people struggle to save enough into a pension. Taking it out of the pension years earlier than necessary could well harm its future income potential.
“We hope that highlighting ‘state pension shortfall day’ will help people better understand what they can expect from the government and what they are expected to be responsible for themselves.”