How state pension changes will affect you – and your pension planning

The basic payment will rise from £6,030 to £8,100 next April, but it’s far more complicated than that. Millions of Britons are being warned not to be lulled into a false sense of security about improvements to the state pension. The reality is that it will cover only a fraction of the amount pensioner households will need.

Calculations suggest that even households used to living on modest incomes may need savings of hundreds of thousands of pounds to maintain their lifestyle.

Some – the self-employed, non-working women and those on benefits – will get a higher state pension than they might previously have received when the basic payment is raised from £6,030 this year to £8,100 next April. But many employees on above-average salaries will get less.

Chris Noon, a senior actuary at Hymans Robertson, says: “The truth is most people in work will be worse off. They will face a big gap between what they need to live on in retirement and what the state will pay them.”

WHAT YOU WILL NEED IN RETIREMENT and how to bridge that gap.

Salary before retirement £20,000 £30,000 £50,000
Essential retirement income £14,000 £20,100 £30,000
New state pension £8,100 £8,100 £8,100
Shortfall £5,900 £12,000 £21,000
Pension pot necessary to bridge the gap £147,500 £300,000 £547,500
Savings requirement as % of salary* 10%-12% 15%-20% 18%-22%
Savings requirement as £ per month* £170-£200 £380-£500 £750-£950
*Based on average working life up to state pension age. Essential income based on guidelines from the Department for Work & Pensions. State pension is figure published 2012-13 uprated by the ‘triple lock’

It is therefore exceptionally important that you review your retirement planning along with any pensions that you may currently hold regardless of an old employers/personal frozen pension or one that you are still contributing to.

If you need help or advice with your Retirement Planning including the new pension freedom changes please contact me, Debbie Day. Mobile:07704311021