State pensioners are to get a sizable increase to their payments from next week as payments increase 10.1 percent. The full basic state pension is increasing to £156.20 a week while the full new state pension is going up to £203.85 a week.
This means a person on the full new state pension will receive £10,600 a year but this is “not enough” to pay for a minimum living standard, according to the Pensions and Lifetime Savings Association.
The group has calculated a single person needs an income of at least £12,800 to cover their basic needs, plus a little extra for social life.
This means a person on the full new state pension would need to find an extra £2,200 a year to have a basic standard of living.
Nigel Peaple, director of Policy and Advocacy at PLSA, said: “Making up the majority of most pensioners’ income, the state pension is a vital pillar in guarding against poverty in retirement.
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“The Government was right to maintain the triple lock in the face of heightened inflation. In time, the State Pension should be reformed so that it is set at a sufficient level to protect everyone – especially under-pensioned groups – from poverty.”
The group estimates a couple would need £19,900 a year to pay for a minimum standard of living.
To achieve a moderate standard of living, including one holiday and some meals out each month, a single pensioner would need £23,300 a year while a couple would need £34,000.
Those who want a more active lifestyle with two holidays and more leisure activities would need £37,300 for a single person, or £54,500 a year for couples.
In efforts to bolster Briton’s retirement savings, the association is calling for a timeline to increase automatic enrolment contributions.
Under the current rules, an employer has to provide a private pension for employees who earn £10,000 or more, and who are aged between 22 and the state pension age, which is currently 66.
The employee has to pay at least five percent of their salary into the pension while the employer has to pay at least three percent of their salary.
The PLSA is calling for this to increase over the next decade so by the early 2030s, the minimum contribution is 12 percent, with both the employer and employee paying six percent.
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Mr Peaple said: “We also want to see the scope of the system expanded to improve savings amongst those not already included.
“A bill has already been laid to allow a younger cohort (18 to 22) to qualify for automatic enrolment and begin from the first pound of earnings.
“However, the biggest lever Government can pull to meaningfully improve the retirement outcomes of millions of savers, is to set a timeline for increasing the minimum pension contributions paid into a worker’s pension by employers.”
The state pension increases each year in line with the triple lock policy, which was reinstated last year.
The policy guarantees state pension payments increase in line with the highest of 2.5 percent, the rise in average earnings or inflation.
Pensioners face rising costs as many household bills are also increasing in April, including energy bills, as the final £67 instalment from the £400 energy bills discount went out in March.
Other bills that are increasing this month include water bills, mobile and broadband, and council tax.
Many benefits payments are also increasing 10.1 percent this month, including Pension Credit, Carer’s Allowance and Attendance Allowance.
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