Once you have received your ‘gateway’ password and other keys to access the website, I can recommend visiting Gov.UK if you’re even remotely interested in pensions. The site, replete with pension calculator, is slick, fast and easy to understand.
As I consider myself to be within striking distance of retirement, I recently used the site to access my forecasted state pension statement, the results based upon the reasonable assumption that National Insurance Contributions will continue to be made up to the point that I call it a day – work-wise, that is.
About the only aspect of this well-planned website that didn’t impress me was the size of the state pension itself. At a shade over £11,000 a year, it’s hardly sufficient to get the grey matter mulling over the prospect of exotic holidays; indeed, there’s barely enough ‘surplus’ to consider enjoying a few beers in the back garden, irrespective of how exotic it might be.
The figure is also painfully short of the £35,000 annual income many older people believe they’ll require during retirement. Moreover, even assuming the full basic pension is paid to a couple, ie £11,500 each, the total amount they receive is just over half the sum that the Pensions & Lifetime Savings Association considers sufficient to enjoy a moderately comfortable retirement (£43,000) . Bear in mind too that according to the Office for National Statistics, the average adult salary is £34,963 per annum. [See chart below]
Pension & Lifetime Savings Association
How much will you need in retirement?
Retirement living standards (2024 figures)
| Status | Basic | Moderate | Comfortable |
|---|---|---|---|
| Single | £14,400 | £31,300 | £43,100 |
| Couple | £22,000 | £43,000 | £59,000 |
| 1973 | £9,767 | Tie a Yellow Ribbon | Tony Orland & Dawn |
Granted, many existing and soon-to-be retirees will supplement their state pensions with workplace and possibly private pensions, but there are likely to be millions of others who, having completed their research, believe their ambitious retirement plans need to be reined in a little. Not necessarily.
Most of us reach an age where we become ‘careful’ and begin to hear our parents’ influence whenever we remind ourselves that money doesn’t grow on trees. There’s nothing wrong with that, although it’s widely accepted that the early years of retirement are often the most active. Hopping on and off trains and planes, exploring different places and hobbies, or perhaps alternative lifestyles, requires energy and a certain amount of ready cash. Plenty of retirees already understand this, which explains why you often cannot move for Baby Boomers should you board a train outside the rush hour, or catch an early morning flight to Europe before schools have broken up for extended holidays.
Driven by their body’s inner call to action (“if not now, when?”), most people who have just entered or are on the cusp of retirement resolve to do something about answering the call as soon as they finish work. The majority of these folks are in their early sixties and recognise, perhaps, that whether you’re trekking to Machu Picchu driving the USA’s famed Route 66, or ‘doing Europe’ for a few months on a senior railcard, the adventure is likely to be more practicable during the early years of retirement.
It’s for this reason that we should explore all retirement income options, including state pensions (take a look at the benefits of deferring your pension); annuities, a source of guaranteed income; investment property, a much-maligned investment class of late, though one where rental returns usually exceed anything offered by a high street bank savings account, and equity release, an increasingly important part of the retirement income mix.
Nor should we consider these different income alternatives in the context of simply going on holiday, or ensuring we have ‘surplus’ cash available to head off somewhere at the drop of a hat before we reach 95*. On the contrary: we should take account of these options and others because the number of years most of us will spend in retirement has increased dramatically since World War II.
This begs the question: will retirees’ savings pots last for the full duration of their retirement? It also emphasises the fact that relying on a single pension ‘product’ is akin to placing all of your eggs in one basket, the content of which may be insufficient to sustain the level of retirement income required to meet ambitious, post-work lifestyle needs.
Releasing equity from the home has been described as discovering hidden treasure. Most homeowners aged 55 and above have spent years paying their mortgage as the value of their property has risen, often spectacularly. Equity release could enable homeowners to tap into this wealth and use it to supplement other sources of retirement income, or pay off an interest-only mortgage, or build an extension to ‘future-proof’ their home and make it more comfortable.
In addition, of course, there’s always trekking to Manchu Picchu, or upgrading your journey by travelling business class, or simply giving your loved ones a hand onto the property ladder. Using equity in your home provides you with the freedom of choice. Always check with the family first as they should be involved in any decisions that could affect their inheritance.
Whichever form of retirement you choose, supplementing the basic state pension increasingly appears to be a must, but remember, the options are probably much broader than you imagine.
*Around five years ago, travelling by train between Australia’s western-most city, Perth, and Adelaide, my wife and I enjoyed a wonderful dining car lunch with a lady who was travelling alone across country to Sydney and planning her onward journey to New Zealand, followed by a cruise around the South Sea Isles. She was 93 and looked 20 years younger. She was fantastic company: erudite, clever and often outrageously funny. Indeed, she was proof that 95 is an arbitrary age, while her adherence to the saying that ‘age is only a number’ was truly inspirational.
