Most of us are aware that the state pension is unlikely to be generous enough to live on comfortably in our retirement. However, as part of a planned retirement income, with an employer’s pension and perhaps a personal pension as well, it can play a vital part in paying for a comfortable retirement.
But many people drastically overestimate the size of their future pension income from the state by nearly £50,000 over the course of their retirement, according to a recent survey by consumer advocates Which?
At Continuum we are looking at the real figures that you can look forward to – and what you can do if your state pension looks set to fall short of providing the kind of income you need.
What will you really get from the government?
Which? surveyed thousands of members of the public about their knowledge of the state pension rules and found that many respondents simply didn’t know what they can expect to receive from the government.
A startlingly large number were very over-optimistic.
The problem is not just a matter of wishful thinking – the actual amount people will receive from the state pension is not as clear-cut as it might be.
The actual maximum level of the new state pension is £175.20 a week – but not everyone will receive this. The full payment is contingent on having 35 years of National Insurance contributions. If you have had a career break perhaps to start and care for a family, it is easy to fall short of the required maximum.
10% of those in the survey wrongly thought that the state pension is worth £200 a week or £10,400 a year on average. This means overestimating the amount they will get from their state pension by as much as £49,400 over the average length of retirement, which is now some 19 years.
There was also some confusion about when you can access your state pension. When Which? asked what the current state pension age is, fewer than one in three correctly identified it as currently 66. A third of respondents thought the state pension was 67, but in fact this increase will not be phased in until between 2026 and 2028.
So, what can you do about a state pension shortfall?
If the true figures about state pensions comes as an unpleasant fact, you may need to take action.
You could of course simply continue working, if you are able, but most people might prefer the course of boosting their pension savings to deliver the income they want in retirement.
At Continuum we can help, with ways to boost your pension pot – and ways to make the most of the savings you already have.
We can start with a full pension review – which will show you just what your income may be in retirement, whether you need to look at your pension plans again – and ensure that you can still look forward to the kind of retirement you want.
At Continuum we know that bad news about your state pension may not mean bad news for your retirement prospects – if you act now.
The information contained in this article is based on the opinion of Continuum and does not constitute financial advice or a recommendation to suitable retirement strategy, you should seek independent financial advice before embarking on any course of action.
A pension is a long term investment The value of investments can fall as well as rise and you may get back less than you invested.
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