State pension payments are increasing 4.1 percent in April (Image: Getty)
People planning for their retirement and their state pension finances have been urged to bear in mind a 20 percent rule.
Pete Glancy, head of pension policy at , warned that most people will need more than their to live on.
The full new is currently £221.20 a week, or £11,502.40 a year, but most claimants get less than this. Figures from the Pensions and Lifetime Savings Association (PLSA) recommend a single person needs at least £14,400 a year for a basic standard of living in retirement, while a couple needs £22,400.
payments are increasing 4.1 percent in April, with the full new amount going up to £230.30 a week, or £11,975.60 a year.
Mr Glancy warned: “Relying on the alone won’t be sufficient to achieve an income which is equivalent to the most basic retirement living standard, as set out by the PLSA.
“Most people will need at least 20 percent more than that to pay for the basics, and workplace pensions are usually a great way of building up that additional pot of money, as your employer contributes towards your pension pot and there are also tax benefits.”
Data from Scottish Widows suggest the median retirement income from pensions is at £14,300 including the , meaning a single person is £100 a year below affording even a basic retirement.
Andrew McMillan, founding partner at , warned that relying on your for your retirement income “is risky and it’s unlikely to support the lifestyle most people want in retirement”.
He said that fortunately most people have “one of the best investment products” for their retirement thanks to having a workplace pension.
Mr McMillan explained: “Unless you don’t have a job or you’ve opted out, your company will be contributing ’free’ money to your retirement pot (as long as you are saving a bit yourself too).
“Your employer’s contribution to your pension plus the fact you get tax-relief on contributions, usually more than doubles the money being put away compared to saving it elsewhere.
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“If you’ve maxed out your workplace contributions, it’s worth speaking to a financial adviser about additional ways to grow your retirement pot.”
Mr Glancy pointed to the efforts that have been made to increase pension savings, with auto enrolment now legislating that employers have to provide a workplace scheme for their employees, with a minimum 8 percent total contribution.
He said it would be a good idea to increase the minimum to 12 percent and to encourage people to put away 15 percent if they can afford it.
He had some other ideas for expanding auto enrolment, saying: “We would ideally see some new reforms that lower the contribution age to 18 and remove the lower contribution threshold.
“Introducing an equivalent to auto-enrolment for self-employed people would also go a long way to addressing savings concerns for that category of workers.”
Under the current rules, you have to be aged 22 and over and earn at least £10,000 a year to be eligible, but legislation has been passed to expand this to all workers with any amount of earnings.