One of the most searched for personal finance questions surrounds the State Pension – including when we’re likely to get the State Pension and how much the State Pension is worth. With a little help, anyone can learn the basics of the State Pension.
So, what age will you receive the State Pension? People currently begin to receive the State Pension at 66, but that will be different by the time you retire. The government plans to move the State Pension age to 67 by 2028 and then 68 by 2046. However, there are also plans to bring this second increase forward to between 2037 and 2039.
You can find out your State Pension age by visiting the Government Gateway.
As for how much you will receive from the State Pension, the maximum payment is £175.20 a week, but how much you’ll get depends on how many years of national insurance contributions you’ve made. As with the State Pension age, this will change by the time you retire but is a useful guide.
You’re probably thinking to yourself that isn’t a lot of money to live on, and you’re right. Imagine every day being a weekend, your life could be expensive when you’ve got so much free time to fill in retirement. Unfortunately, the State Pension may turn out to not be enough for most people to have a comfortable retirement. It only amounts to around £9,110 a year to live on.
So, what can you do to retire and enjoy the lifestyle you’re used to?
That’s where personal and workplace pensions come in. Using them well can increase the likelihood of growing the amount of money you have to live on when you retire.
These are different from the State Pension, as they are pensions that you can make choices about – including how much to contribute and where you want to invest them.
With a workplace pension, you’ll typically get a contribution from your employer in addition to your own contribution, which can help you increase your pension’s value over time. The current employer minimum contribution is 3%.
If you’re self-employed or want to have another place to invest for retirement, a Personal Pension gives you even greater control over your money.
What you need to think carefully about is your retirement goal. Think about your lifestyle costs, how much will you need in retirement and for how many years or even decades? You can then determine how much to contribute over what period of time, and based on an assumed rate of growth you can map out how to achieve your goal in a Personal Pension.
Based on True Potential’s own Savings Gap research, we’ve found out that the average retiree will potentially need around £23,000 a year for a comfortable retirement.
With the state pension offering a maximum of £9,110 from age 66, that leaves a gap to fill – especially if you want to retire earlier.
To close your Savings Gap, focus on disciplined regular investing in a workplace or personal pension over a long period of time. This can be summed up as a ‘get rich slow’ scheme that can pay for your retirement. It might seem a little boring, but a simple direct debit can compound over time and drastically improve the lifestyle you can enjoy in retirement.
Start investing as soon as you can. There’s a saying that the best time to invest was 10 years ago, the second best time is now. If you just get started, you can build more money by investing small amounts for longer, rather than trying to catch up later.
The State Pension may not be enough. The current State Pension of £175.20 a week is potentially be insufficient for a comfortable retirement. And with the State Pension age being 66 and rising, you need to act now if you want to retire on your terms with sufficient funds to live the life you are used to.
The good news is there are ways to improve your retirement. Investing in a personal or workplace pension now can help you retire with enough money to enjoy life, at an age you choose.
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