State pension not enough to fund retirement as Britons struggle to save | Personal Finance | Finance
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The state pension is a key source of income for retirees, and can provide a foundation for which to build on as Britons plan their retirement. However, savers may face an uphill battle to top up their pension pots as inflation wreaks havoc on their finances.
The full new state pension is currently valued at £179.60 per week, which provides a yearly income of £9,339.20 for pensioners in the UK.
However, this rate will increase from April 2022 by 3.1 percent due to the triple lock policy, which is used to boost the state pension each year.
That means the full new state pension will rise to £185.15, an extra £5.55 per week and £288.60 for the year.
The new state pension is for people who reached, or who will reach, state pension age on or after April 6, 2016.
READ MORE: Pensioners set to lose free bus pass due to state pension changes- who will be eligible?
However, it is not believed that the state pension alone is enough for people to live on in retirement, which means a heavy responsibility must be placed on private and workplace pensions to sustain Britons when they stop working.
According to the Pensions and Lifetime Savings Association, retirees may need thousands of pounds more each year to live their desired lifestyle in retirement.
Their Retirement Living Standards indicate that a single pensioner needs a yearly income of £10,900 just to enjoy a “minimum” lifestyle and to cover the essentials.
Single retirees could need £20,800 per year to live a “moderate” retirement lifestyle, and couples may require a combined £30,600.
Donna Walsh, Head of Workplace Deployment at Standard Life, believes sky-high inflation rates could reduce Britons’ ability to put money away for retirement to supplement their state pension income.
She said: “The spectre of inflation could have a devastating impact on how far people’s income will go in retirement.
“Those who are still working may find it harder to save for their future, particularly if they are on lower pay.
“If prices rise and household incomes are squeezed, some people may find themselves considering if they should reduce or stop their pension contributions.
“This is an important decision at any time, as the outcome will be felt all the way to and through retirement.”
Ms Walsh is also concerned about the impact of inflation on people who pay into workplace pensions.
She said: “For some people in workplace pension schemes, reducing their personal contribution could also mean they miss out on matching contributions from their employer, an unintended double whammy.
“We’d urge anyone concerned about maintaining their savings into their pension to speak to their employer, their pension provider or to contact Pension Wise for free guidance and support.”
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