In a recent report, industry experts have suggested that the minimum post-tax annual income needed by a single person to retire is £10,900, rising to £16,700 for a couple. These sums are required simply to maintain a minimum standard of living.
The estimations have come from academics who have produced figures for The Pensions and Lifetime Savings Association (PLSA). Officials from the association said that it is essential for people to consider whether they are bringing in enough to retire given the new figures. They also believe that the recent lockdowns stemming from the Covid-19 pandemic have given people a better idea of what life in retirement will be like.
Using the figures as a guide
The figures that have been calculated are designed to be used as a guide by those who want to ensure they have enough money to enjoy the type of retirement they want. This figure is given as the minimum for retirees to manage on a basic level, but the amount required goes up for those who want to enjoy a better standard of living during retirement.
Nigel Peaple, director of policy and advocacy at the PLSA, said, "The pandemic has emphasised the importance of economic security as well as social and cultural participation in retirement. We hope the updated standards will encourage people to think about whether they are saving enough for the retirement lifestyle they want and, in particular, whether they are making the most of the employer contributions on offer in their workplace pension."
While the minimum amount has been estimated to ensure retirees can cover essential costs, it also considers expenses like haircuts and streaming subscriptions for the first time.
It was further shown that the minimum amount needed per year for a single person has risen by £700 compared to 2019. For a couple, the amount required to meet basic retirement costs has increased by £1000 in the same period.
Pensions expert claims state pension age changes still not out of the question
Over recent months, there has been a lot of debate over whether the government should lower the state pension age in the UK. Many have argued that allowing people to retire earlier will open up more jobs for younger people who have no other option but to work. However, others have argued that lowering the pension age will cost taxpayers far too much money.
While the government has not indicated that it is considering lowering the state pension age, one industry expert said it is not out of the question. Tom Selby, head of retirement policy at AJ Bell, said that there were various reasons why the government might consider lowering the age. This comes as the chancellor, Rishi Sunak, prepares for his Autumn Budget later this month.
A fall in life expectancy
Several possible reasons for the government considering dropping the state pension age were outlined by Mr. Selby. One of these was the fall in life expectancy seen in the UK. However, he admitted that this could be a temporary situation because of the pandemic.
At present, the state pension age stands at 66, and by 2028 there are plans to increase this to 67. By 2046, another increase in the state pension age is planned, rising to 68. However, the latter could potentially be brought forward to 2039.
Mr. Selby recently said, "Furthermore, we have recently seen a sharp drop in average life expectancy – although this may be a temporary blip as a result of the pandemic. Against this backdrop, it is not beyond the realms of possibility the government will announce a review of planned state pension age increases, with a focus on inequalities and the potential long-term impact of Covid."
He added that many people would be happy if the government would postpone or even cancel any increases in the state pension age that were planned. However, he admitted that this would prove very costly to the treasury.
Government considers scrapping free prescriptions for those under state pension age
Proposals from the government could see vast numbers of people aged 60 and over having to pay for their prescriptions. With many people, particularly older people nearing retirement, already struggling financially, this will cause a lot of concern among those who rely on free prescriptions.
For the past quarter of a century, the free prescription age has stood at 60. However, government proposals have suggested bringing the free prescription age in line with the state pension age, which is currently 66. This means that older people will be forced to pay for prescriptions for an additional six years, which could then increase in line with state pension age increases.
People at risk of facing penalties
For many people approaching 60 and those already 60 and above, this situation could prove to be extremely difficult. It will be especially difficult for those who have health problems and are on regular prescription medication that has to be paid for.
However, strict measures are already in place to ensure that people who are not entitled to free prescriptions do not escape paying for them. The penalties for doing this can be hefty, and this will put many of those who are used to getting free prescriptions in a precarious financial situation.
Those who try to get free prescriptions that they are not entitled to are sent Penalty Charge Notices, which means they have to pay the original amount plus extra on top. The additional amount could go up to £100, and if the payment is not made within the specified timeframe, further charges could be added.
Under the proposals, others entitled to free prescriptions such as those on certain benefits would not be affected. However, swathes of those aged between 60 and 65 could be hit hard financially.
According to NHS officials, the health service loses enormous amounts of money annually due to people attempting to get free prescriptions when they are not entitled to them. The charges from prescriptions are vital to the funding of frontline NHS services. The losses stemming from people not paying the costs impact patient care.
If the proposals go ahead, it could mean a considerable boost in revenue for the NHS and funding frontline medical services. However, it will also mean a huge problem for many older people who require regular medication.
Increase in contactless bank card limits comes into play
This week sees the start of a new increased limit on contactless bank card payments, which has pleased many people due to enhanced convenience. However, it has also raised many concerns among those who are worried that the group that will most benefit are thieves who will focus on stealing bank cards due to the increased limit.
Contactless payments were introduced back in 2007, and over the past 14 years, the limit has increased periodically. The limit was initially capped at just £10, which then grew to £30, and last year it increased further to £45.
With more and more people now using cashless payment methods – and more businesses preferring or demanding it – the limit is increasing to £100 per transaction. This means that cardholders can pay for goods to the value of £100 without the need for a PIN. However, according to reports, some are concerned that this will mean thieves can steal more money from the cardholder’s account if they get a hold of the card.
Additional concerns raised by consumers
The potential for greater gains for fraudsters and thieves is not the only concern that has been raised by cardholders in the UK following the increase. Some have also said that it could lead to people losing control of their spending more easily, which could seriously affect their finances.
However, the British Retail Consortium has said that not all retailers will raise their limits in line with the increase, as it is not mandatory.
In a recent release, the BRC wrote: “Customers should take extra care when making contactless payments from October 2021 as different businesses may have different limits in place, or at a different stage in their roll-out. Please ensure that your transaction has completed successfully before leaving the check-out.”
In addition, officials have said that some banks may give customers more flexibility around their contactless limits. This means that those concerned may be able to lower their own contactless transaction limits rather than letting it sit at £100. This is something that cardholders would need to check with their individual banks to see whether it is an option.
Younger people fearful over the future of state pensions
Recent research has revealed that many younger people in Britain have no faith in the state pension system or the government’s ability to maintain the system adequately. Research was carried out by Interactive Investor and showed that more than 50% of those aged 24-29 believed that they would receive no state pension by the time they retired.
Concerns have been raised among younger people for a range of reasons. Recently, the government suspended the triple lock system in a bid to control the level by which the state pension would increase next year. Younger people have also seen the government put forward plans to increase the state pension age several times in the coming years.
Lack of trust among younger people
The Great British Retirement Survey findings suggest there is a severe lack of trust among younger and older people when it comes to the government being able to live up to its promises regarding pensions.
Moira O’Neill, head of personal finance at Interactive Investor, said: "Saving into pensions is an act of faith – it’s something we’re encouraged to do all our working lives. So, it’s not surprising that people’s faith is undermined, and their tolerance stretched when the chancellor plays Dick Turpin with pensions."
The figures showed that around 20% of older people who are not yet retired were unsure whether they would receive a state pension. The figure increased to 26% among those in their thirties and rocketed to 53% in the 24-29 age group.
Over 10,000 people were involved in the study, and close to 50% of them said they had concerns about running out of money once they retired. This was further fuelled by concerns over rising living costs and slumps in share values.
In addition, they raised concerns about the potential for further taxation on life savings later in life, with many highlighting issues relating to the Lifetime Allowance being further reduced. This allowance refers to the money you are allowed to have in a pension without being taxed. Last year, the chancellor, Rishi Sunak, said that the allowance would not rise in line with inflation, which has left many worried about their retirement finances.
Ms O’Neill said, “Many engaged long term investors see the lifetime allowance as highway robbery, and with the Treasury repeatedly signalling more tax attacks on pensions, they get even angrier.”