Centre Finds State Pension Inadequate

State pensions don’t cover the amount needed for retirement due to the recent increase in prices according to research by a university department. 

Research at Loughborough University department of social policy Centre for Social Research, funded by Pensions and Lifetime Savings Association (PLSA) found the minimum amount needed to retire at a basic standard of living increased by £2,000 in the last year. 

The rise in fuel and food prices means although the full pension rose this year from £9,627 to £10, 600  many people continue to struggle to have a minimum standard of quality of life. 

PLSA said the cost of a ‘minimum lifestyle’ has increased from £10,900 in 2021 to £12,800 in 2022 – or 18 percent – for a single person. For those in a couple, it has gone from £16,700 to £19,900, 19 percent. 

The university centre has compiled minimum standards bench – mark test, that’s the same as the Joseph Rowntree Trust and has become the industry – standard measurement for what pensioners need in retirement. The Jospeh Rowntree Trust stresses the amount must factor in dignity and cultural and social participation. 

The minimum amount allows £54 a week for food, no car, enough money for a short break in the UK every year and £580 a year for clothing and footwear. It assumes the person works until 67 and has a full national insurance record and has paid off the mortgage. 

The figures describe a moderate lifestyle in retirement as £74 a week on food, a secondhand car that can be replaced every 10 years, a two-week holiday in Europe every year and £791 for clothing and footwear. For a single pensioner that will mean he or she needs £23,300 a year, and for a couple it is £34,000 a year (or £41,400 if you are in London). 

For those more affluent expecting a comfortable way of life the total predicted need is £37,300 a year as a single person, or £54,500 a year as a couple allowing three weeks’ holiday in Europe a year, £1500 on clothing, £174 a week on food and a nice car. 

The researchers at Loughborough estimate that only 72% of the total population are on track to reach at least the minimum standard of living in retirement. About a fifth of the population are on track to hit the moderate income level in retirement, while 8% will be in the comfortable bracket. However, these figures predate the current rise in inflation. 

Due to the government’s pension triple lock the state pension increases by 2.5 percent, average earnings growth or inflation – whichever figure is the biggest. This year, it will rise with inflation after having been temporarily scrapped by former chancellor and current prime minster Rishi Sunak, from 2021 to 2022.