The new state pension launches today, but research from retiresavvy.co.uk has found that many pensioners could find the amount offered unsustainable – with some having to halve their living costs in order to cope.
The figures reveal that many pensioners could be short of £165.05 per week under the new system: the average person nearing pension age currently spends an average of £320.70 each week on essential living costs (such as utilities, bills, rent, food and clothing), which makes the flat rate of £155.65 now offered wholly insufficient.
Looking on a monthly basis highlights the shortfall in more detail, with the average pre-retiree spending £1,379.03 in a typical calendar month – a figure that the maximum state pension of £699.30 a month doesn't even come close to covering. Typical expenditure only accounts for the essentials, too, which means that spending on things such as eating out, DIY, socialising and travel will need to be cut by 51%.
This could catch many people off-guard, too, with 42% of respondents having no idea that the new state pension offered £155.65 a week. As a result, one in six said they wouldn't be able to cope on that amount while 21% were worried that they'll need to find an alternative form of income, and two-thirds of those aged 50-65 said they'd need to trim expenditure by the time they reach retirement age.
Just four in 10 said they were comfortable with the new state pension as they have other financial plans in place, which highlights the importance of forward planning.
"It's amazing how many people don't know how much state pension they can expect," said Andrew Sheen of www.retiresavvy.co.uk. "Although the [new regime] is more generous than the system it replaces, it's still less than half of what the average 50-65 year-old currently needs to live on.
"If they get to state pension age without having their own plans in place, a lot of people will have a big surprise and face a huge change in the kind of lifestyle they can afford… People need to plan ahead if they're going to make the most of later life."
Find out more about why you need a workplace pension – it could give you the additional retirement income you need
Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.
Moneyfacts.co.uk will, like most other websites, place cookies onto your computer’s
hard drive. This includes tracking cookies.