Figures published by the Office for National Statistics confirmed one in six (17%) pensioners in the UK are surviving on the State Pension alone. This is an increase of 3% since the 2017/18 tax year. Single pensioners are the most dependent on state benefits with a quarter (the highest proportion ever recorded) having no other income source.
With the current flat rate State Pension being £168.60 per week (£8,767.20 per annum), you need to consider if this would be sufficient for your income needs in retirement? State Pensions account for more than 43% of pensioner income, although with the introduction of auto-enrolment, which ensures employees are enrolled in their employer’s pension schemes, it is hoped that this will avoid the heavy reliance on State Pensions continuing in the future. If you are not already a member of your employer’s pension scheme, you should consider joining it to benefit from the employer contributions.
The State Pension age has increased and is currently under review again. Currently, for someone aged fifty, they would receive their State Pension at age sixty-seven and for someone aged forty, they would need to wait until age sixty-eight before they received their State Pension. However, this may change in the future.
If people continue to rely solely on the State Pension they will need to continue working for longer in view of the increase in the State Pension age. Therefore, everyone should ensure that they make their own pension provisions to ensure they have an adequate income in retirement and have more flexibility on when they wish to retire. Pensions are very tax efficient as you receive tax relief on the contributions paid. For example, for every £100 net invested, you will receive tax relief of £25 to make a gross contribution of £125. Higher rate taxpayers can reclaim the additional £25 and additional rate taxpayers can reclaim £31.25. The pension fund also grows free from income and capital gains tax. Therefore, if you are not currently contributing to a pension, you should consider doing so.
If you do wish to consider pension funding or require any assistance with your retirement planning, please speak to one of our highly qualified Advisers who will be happy to assist you further.