101 working days to earn a year’s state pension allowance
5 June 2018
By Friday 25 May, the average UK full-time employee has earned the equivalent of a full year of state pension payments, the latest data from Aviva has shown.
The current state pension pays retirees an income of £8,546.20 per year. In contrast, an average salary of £26,676 per year gives the average UK full-time worker £21,419.36 per year to live on after tax – 2.5 times more than the state pension.
In the first 101 working days of 2018, the average UK full-time employee will have earned the full year’s state pension allowance.
Aviva said the figures highlight the challenges pensioners would face in retirement without other sources of income to rely on and worryingly, its research showed nearly one in five (17%) working adults believe the state pension will be their main source of retirement income.
Alistair McQueen, head of savings & retirement, Aviva, said: “How many of us could survive until 31 December with the amount of money we have already earned this year – or live for the whole year on just £8,546? The state pension is a national treasure and the bedrock of many retirement plans. However, most of us will find that it isn’t enough to meet all our financial needs in retirement.”
While auto-enrolment will go some way to help bridge the gap, with the minimum contribution having risen to 5% in April, the situation differs for those who are self-employed with currently no auto-enrolment equivalent in place. Latest figures from the Department for Work and Pensions suggest that only one in seven self-employed workers saved into a pension in 2016, increasing the risk of a lack of income outside of the state pension in retirement.
McQueen added: “Auto-enrolment has helped the UK take a step forwards to saving more via workplace pensions, but the threat of financial struggles in retirement hasn’t gone away, especially for the self-employed. Saving more into a pension means having to make the rest of the monthly pay cheque stretch further, but a far tougher challenge will come when you’re no longer earning and have a much bigger income drop to deal with.
“The state pension can only replace the average worker’s income for 101 working days a year. Thanks to employer contributions and tax relief, more money goes into your workplace pension each month than comes out of your salary, so we urge people to think of the future and play the long game by putting saving first.”
What are the top skills employers typically want to see from a paraplanner? Lewis Byford, co-founder of financial services...
Are you signed up to the Professional Paraplanner daily website alert? For more technical, tax, pensions, investment, retirement, protection...
With £355 billion of debt having been accumulated in the past year and a potential £204 billion or more to be...