Published On: Wed, Mar 27th, 2024
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DWP state pension warning over fears funds will not be enough to retire on | Personal Finance | Finance

The state pension may not provide a stable future to retirees due to the cost of living crisis, experts have warned.

Pension experts at Spencer Churchill Claims Advice have warned that the widening gap between pension payments and the rising cost of living will result in financial instability post retirement.

An expert from SCCA said: “The current state of the UK pension system reflects a concerning situation for retirees. Despite annual increases, pensioners can barely keep up with the rising cost of living.

“For instance, the average pensioner in Britain faces a £40 monthly shortfall compared to last year, even with yearly pension bumps.”

“The UK’s 17th place ranking out of 50 countries in the European Breakeven Index highlights the challenges pensioners face.“

With pensions falling behind living costs by over £4,000 a year, it’s clear that only relying on the state pension might not be enough for a comfortable retirement.

Compared to other European countries pensioners in the UK are over £4,300 worse off.

The maximum state pension in the UK pays a total of £884.40 per month to retirees, which is just £74.40 more than the average cost of living for a pensioner.

The state pension will soon rise to over £220 a week but experts believe that this still won’t stretch enough to cover the increasing cost of living.

The expert from SCAA continued: “Planning for retirement means taking steps like putting more into your pension when you get a raise, getting the most out of what your employer puts in, and making sure your investments match your goals and how much risk you’re comfortable with.

“According to recent data, the monthly cost of living for a single person in the UK is £810.40, which doesn’t even include rent.

“It’s important for retirees to make the most of tax breaks and be careful when taking money out of their pension. Taking out tax-free cash might be tempting, but it’s best to avoid taking out more than you need to avoid higher taxes and keep your retirement savings safe.

Remember, taking out the first 25 percent of their pension will receive tax-free cash, but future withdrawals will be taxable.”

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