Martin Lewis shares tips for boosting state pension
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New figures show the UK state pension only just breaks even when compared to what other people who have reached state pension age receive across the rest of Europe resulting in two million pensioners living in poverty. UK pensioners have just £28 a week left over after paying household expenses according to The Pension Breakeven Index, compiled by pension advisors at Almond Financial. While experts fear things will only get worse due to the increasing cost of living, they have shared five ways Britons can make their pensions work better.
The Pension Breakeven Index, compiled by pension advisors Almond Financial, looked at the current state pension in comparison to the average cost of living in the UK.
Experts then looked at similar data in all of Europe’s 50 countries to establish which country offers the most to retirees in comparison to the country’s current cost of living data.
It then analysed the average cost of general living expenses such as food shopping, the price of a meal at a restaurant and energy bills to discover an estimated cost of living per month, excluding rent.
The UK finished 15th in the Pension Breakeven Index, paying just £114.28 more than the average cost of living for a pensioner – £28.57 a week.
In comparison, the Spanish pension system pays out a maximum of €2,617.53 per month, the equivalent to a whopping £1,403.89 more than the UK.
Principal financial adviser at Almond Financial, Sam Robinson, said: “The UK has a system that is just above the breakeven point which means at present, there isn’t much room to manoeuvre for those battling the cost of living crisis. And while it is positive that the UK finds itself among the top half of countries, for how much longer is the question.
“While the increase in state pension in line with inflation is needed and welcomed, it’s clear that those over 66 need to look at other options rather than just relying on the state pension.
“Planning for life after work is crucial and it’s important to seek advice from a pension advisor if you aren’t sure where to start.”
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Almond Financial suggests five ways Britons can maximise retirement benefits:
“Use pay rises to increase pension contributions and pay more into pension when loans and other commitments end
“Maximise employer contributions
“Ensure your investment approach is efficient and suitable to your financial situation
“Maximise tax relief available
“Avoid taking large lump sums of money from the pension when there isn’t a need – Taking the first 25 percent of your pension will be tax-free cash although any future withdrawals will be taxable.”
Meanwhile, Britons are being urged to check their state pension as it could save them thousands of pounds.
People of all ages, especially those nearing state pension age, are being reminded to go online and check their state pension to see if they have enough National Insurance (NI) contributions before the rules change in April 2023.
People are usually only entitled to the full new state pension if they have 35 years’ NI contributions but Britons may benefit by paying to fill in any gaps before the deadline.
On ITV’s Lorraine programme, Claer Barrett, Consumer Editor at the Financial Times, said: “Go online – there’s a really good free Government website – GOV.UK – where you can see if you’ve got any gaps and at the moment you can pay around £800 a year to fill a missing year.”
She continued: “If you do that it means you’ll get more state pension every year of your life when you retire so that £800 investment could bring you thousands in years to come.
“But the rules change in April and you can only fill in gaps going back six years from then, so really important to look now.”
MoneySavingExpert founder Martin Lewis has also been urging people to check their NI contributions as people could turn £800 into £5,500.
Mr Lewis suggests anyone who hasn’t yet reached state pension age to go to GOV.UK and look up their state pension summary.
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