State pension triple lock pledge faces ‘future challenges’ in ‘balancing books’
Sturgeon says the removal of the triple lock is 'disgraceful'
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New census figures show an increase in the working-age population nearing retirement. This could add to the demand on the Treasury for pension benefits and health services over the next decade, which could result in the state pension triple lock being revised again in the future.
James Andrews, personal finance expert at Money.co.uk commented on these figures and urged Britons to focus on their pension savings as the Government could be facing economical strains in the next decade.
He said: “This data highlights the challenges facing future governments wishing to retain the triple lock pension pledge while also balancing their books.
“Put simply, the proportion of people paying into the system is shrinking while the number of people reaching pensionable age continues to grow.
“Currently, the average pension pot after a lifetime of saving stands at just £61,000, which when added to the state pension makes for an income of just £12,000 annually.
“If you plan on being among the half a million people who currently live into their 90s, then that’s very thin gruel indeed — and getting thinner every day.
“There’s never been a more urgent need for workers to look at their retirement nest-egg and ask themselves if they will have enough to survive.”
The census showed that the portion of the population older than 65 rose to 18.6 percent from 16.4 percent over the most recent decade, highlighting the political and economic strain facing the UK government.
The triple lock is a mechanism which is supposed to increase the state pension every year in line with the highest of the following three things: inflation, the average salary increase, or 2.5 percent.
However the triple lock was suspended this year, breaking a key Conservative manifesto promise.
The Government decided to suspend the triple lock to save £5billion which it needed to prop up the economy after the pandemic affected people’s wages.
If the triple lock had not been frozen, pensioners would have had an extra income boost of £882 per year in 2022.
After being suspended in 2022, the Government announced that the triple lock will be reinstated by 2023.
With inflation expected to reach at least 10 percent before 2022 is over, state pensioners could see their payments boosted an additional £960 a year.
It would make the full new rate increase by £18.52 per week, bringing it to a total of £203.67, or £814.68 a month.
As the average pension pot after a lifetime of saving stands at just £61,000, Britons are urged to ask themselves if they have enough.
Dom James, finance writer at Money.co.uk explained how much people may need to “retire comfortably,” which is now more important as people are living longer.
He said: “When working out how much you’ll need to save, you first need to know what kind of income you’ll want when you stop working. This will vary from person to person.
“For instance, if you were earning £20k when working, you’re unlikely to need £50k a year when you stop. But someone whose job pays £100k a year may find they need significantly more than £50k per annum.
“As a rule of thumb, most experts say you’ll need an income of 50-66 percent of your salary pre-retirement. So if you earn £30k a year, you’ll want your pension to pay between £15-20k to be comfortable.
“But everyone is different – and you may need more or less depending on your future plans. For instance, if you’re going to be renting in retirement, you’ll need more cash than someone who owns their home outright.
“If you have older children, you might need to set aside money to help with university fees, while if your kids have flown the next, you might get by with less capital.
“You need to take other savings and sources of income into account – for instance, if you’re a landlord, that income might go towards your retirement needs, meaning you need less in your pension overall.”
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