Over two million Brits get under £100 a week in state pension and more of this week’s finance news

Over two million Brits get under £100 a week in state pension and more of this week’s finance news

 · 12 min read
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In this week's finance news roundup, it is revealed that over two million Brits are getting less than £100 a week in state pension payments. Elsewhere, UK staycation prices are skyrocketing. Spain remains the most desirable destination for ex-pats, and the property market faces a severe stock shortage.

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According to a new This is Money feature, a recent state pension analysis from Hargreaves Lansdown has revealed that 2.1 million Brits receive less than £100 a week in state pension payments.

For comparison, the full state pension is:

  • £179.60 per week (c.£9,300 per year) for people who reached state pension age after April 2016.
  • £137.60 per week (c.£7,200 per year) for people who reached state pension age before April 2016.

While there may be several reasons people don’t receive the full state pension, the number receiving less than £100 per week is significant and sure to raise questions about pensioner poverty.

The revelation that so many people receive such a meagre amount comes as the state pension triple lock remains under the spotlight and is likely to be watered down to avoid a massive increase in April 2022.

The report also highlighted that women, in particular, may be the victim of their state pension being underpaid. As a result, married women who reached state pension age before April 2016, widows, divorcees, and all women over 80 are being encouraged to check their state pension entitlement. While many women have already received significant backdated pension windfalls, people should check their entitlement as soon as possible to ensure they don’t miss out on anything they are owed.

Regarding pre-emptive action, couples who claim Child Benefit but where only one of them works should check how their Child Benefit is paid. If the benefit is paid to the working partner, the non-working partner won't accrue National Insurance credits, which are a vital component in ensuring the maximum possible state pension upon reaching retirement age.

Helen Morrissey of Hargreaves Lansdown told This is Money, “The most recent figures from DWP show more than 2.1m pensioners are receiving less than £100 per week in State Pension, with women overall likely to receive less than men.

“If you have other sources of income in retirement, this many not be an issue, but for many people the state pension is the backbone of their retirement planning and they could receive a nasty shock if they find they are entitled to less than they thought.”

Staycation costs soaring amid pandemic

Analysis from consumer group Which?, in conjunction with this past Wednesday’s episode of BBC Panorama, has highlighted the extent to which staycation costs have soared amid the Covid-19 pandemic.

Using AirDNA data, Which? and Panorama found that the average cost of a self-catering break in the UK was £300 per week more expensive than in 2019.

Back in May, Opinium research found that over 20 million Brits were planning a staycation this year. However, avoiding the Government's often confusing and illogical travel guidance and quarantine requirements comes at a high cost.

Unsurprisingly, coastal destinations saw the most significant increases in prices. Topping the list were:

  • Brighton, with a single night costing 89% more than in 2019
  • St Helier, with a rise of 76%
  • Lyme Regis, with an increase of 74%

While it’s easy to say this is due to hotels profiteering or making up their Covid-driven revenue shortfalls from the past 18 months, it isn’t as straightforward as that. For example, many of the most significant increases in costs have been observed on holiday rentals offered on sites like Airbnb. While Airbnb did not comment when approached by the BBC, many hosts have blamed cost increases on the third-party websites on which they advertise hiking commissions, which can significantly inflate the price holidaymakers pay. The increased onus on accommodation providers to ensure the cleanliness and hygiene of their facilities has also increased upkeep costs. This year’s surge in demand has undoubtedly been a significant factor, too.

Catherine Lane, owner of six holiday lets in Brighton, told Panorama, "Now we have to have cleaning and sanitation costs, which are much higher. We have to have time for the cleaners to disinfect the place…[But] a lot of pricing we don't have control over.

"If you're booking by third-party advertising website, they're putting commissions on the actual end price."

Vrbo, a less well-known but similar platform to Airbnb, denied applying commissions, telling Panorama it "does not set, change or influence the property prices a host chooses".

Cheaper to holiday abroad, but not a new trend

Such is the surge in UK staycation prices that holidays in desirable overseas locations are cheaper than holidaying at home, even with flight costs factored in.

For example, Which? found the following when studying the costs of a week-long break:

  • A week in Nice, on the south coast of France, cost £1,085 compared to a week in Brighton at £1,131.
  • A week at Lake Garda, Italy, cost £802 compared to a week at Lake Windermere in the Lake District at £2,424.

Three weeks in Italy for the price of one in the UK might seem ridiculous. Still, it's available for anyone wanting to get out of the country for a few weeks!

While Which? and Panorama were predominantly comparing prices from 2019, it was noted that accommodation in the UK was more expensive than that overseas two years ago, before the pandemic.

Talking about the differences in costs, Rory Boland of Which? said, "We're not talking about £10, we're not talking about the cost of a meal out. We're talking…hundreds and hundreds of pounds.

"When we looked at it, accommodation prices in 2019 were more expensive in the UK than they were abroad. So this isn't a pandemic problem only, the pandemic has made it worse".

Spain tops would be ex-pats wish list, but many aren’t aware of pension consequences

A new survey from Canada Life has revealed that Spain remains the most desirable destination for Brit ex-pats.

However, concerns around Brexit and Covid-19 mean that many Brits previously planning to retire abroad are now reconsidering those plans.

Spain is by far the most desirable destination for would-be Brit ex-pats, with 49% of those planning to move overseas having an eye on the country. France and Portugal complete the top three desirable destinations, at 21% and 19%, respectively.

Canada Life’s report also found, among Brits thinking about or planning to move abroad:

  • 50% are reconsidering where they’ll move to in light of Brexit
  • 47% are rethinking moving abroad at all due to Brexit
  • 42% are reviewing where to move to in light of Covid-19
  • 39% are reconsidering moving abroad at all due to Covid-19

The usual suspects featured among the motivations for wanting to relocate overseas:

  • 69% want to move somewhere with better weather
  • 62% want to enjoy a more desirable lifestyle
  • 45% want to find somewhere to live with cheaper living costs

Significant gaps in knowledge surrounding pension consequences

Canada Life also discovered that 1 in 4 people planning to move abroad was unaware of the potential impact on their state pension.

While many who opt to retire overseas will have significant personal and workplace pensions, some ex-pats will rely on their state pension to supplement their income. Whatever the circumstances, it's always wise to claim what you're entitled to. At the very least, ex-pats claiming their state pension even if they don’t “need it” will receive a nice little bonus they can spend on a hobby or anything else they wish.

Although any Brit who moves abroad retains their state pension entitlement, what pension they’ll get depends on where they move to.

Brits who move to certain countries will receive the annual state pension increases the same as UK residents due to post-Brexit arrangements. These countries are:

  • European Union countries
  • Switzerland
  • Non-EU, European Economic Area countries – Iceland, Norway, Liechtenstein

Brits who move to other countries will still receive a state pension, but the amount will be frozen at what it is at the time of emigrating. Brits in this situation will only get a state pension increase, which will be revised to the current level, should they return to live in the UK permanently.

The latest available data, from November 2020, indicates that around 1.1 million people live overseas and receive a UK state pension, of which nearly 490,000 are frozen at the value at the time of relocation.

Sean Christian of Canada Life told This is Money, “Despite Brexit and the ongoing global pandemic, many over-50s continue to harbour the dream of a retirement which includes better weather, a more desirable lifestyle, or cheaper standards of living than the UK.

“There are a number of key considerations when planning a move abroad, such as which countries offer reciprocal payment agreements [on state pension increases], thinking about the impact of currency exchange rates and whether state pensions will keep pace with the cost of living.”

Property market facing worst shortage since 2015

Online property portal Zoopla has warned that the property market faces its worst shortage in new listings since 2015. Zoopla's warning follows Rightmove reporting last week that property prices had fallen slightly month-on-month for the first time this year.

A shortage in properties allied to increasing demand is one of several factors likely to contribute to property prices returning to growth quickly.

Zoopla reported that housing stock is down:

  • 26% against 2020
  • 33% against 2019 and 2018

Properties priced below £350,000 are reported to be in the shortest supply. However, the lack of available properties is contributing to transactions happening much quicker, with the average time between listing and an agreed sale 26 days this year, compared to 49 days in 2019.

This is Money cited the Zoopla report as saying, “It’s the supply of three and four bed family homes that is most stretched.

“The narrowing in choice of homes to buy, especially for family houses, means the market will start to slow naturally during the rest of the year and into next, as buyers wait for more stock to become available.

“While we anticipate a strong start to 2022 in line with seasonal trends, there will be a slow reparation of stock throughout the first half of the year.”

Zoopla stated the lack of availability was contributing to price hikes in certain areas. In particular, areas usually noted for their lower than average prices and affordability were seeing significant growth.

Gráinne Gilmore of Zoopla, said, “The post-pandemic ‘reassessment of home’ - households deciding to change how and where they live - has further to run, especially as office-based workers receive confirmation about flexible working, allowing more leeway to live further from the office.

“This means higher levels of demand will still be evident, and potential vendors with family houses to sell could be in pole position.

“However, the lack of supply, especially for family houses, means the market will start to naturally slow during the rest of this year and into next year, as buyers hold on for more stock to become available before making a move.

“As we move into 2022, there will be a strong start to the year in line with seasonal trends, but after that, a return to more usual levels of activity among first-time buyers, the effect of the ending of the stamp duty holiday, and some buyers waiting for more stock to become available will result in a slow repairing of stock levels through the first half of the year.”

Contactless payments growing ahead of limit increase

A BBC report has revealed that contactless card payments surged as the UK emerged from lockdown in early 2021.

While the early months of the pandemic were marked by an increase in card payments overall amid fears the UK was accelerating towards becoming a cashless society, the trend has continued even as the country has proceeded into the “new normal.”

At present, people must spend £45 or under to use contactless payments. This limit is set to increase to £100 later this year, which will hugely accelerate the volume of contactless payments. So other than large grocery shops or big-ticket purchases, it is feasible that every debit or credit purchase could be contactless by the end of 2021.

Karl Tippins
Karl Tippins
Karl joined Age Group in 2020 as Editor-in-Chief for the group's entire collection of websites. Karl is an experienced finance writer in his own right, with expertise on everything from financial planning and budgeting to identifying financial mis-selling.
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