8% State Pension increase would still be short of minimum acceptable retirement income

If the State Pension were to increase by 8% it would still leave a £730-a-year income gap compared to the Joseph Rowntree Foundation’s Minimum Income Standard, according to new analysis from Just Group.

Research from the retirement services group suggested that a pensioner entitled to the full new State Pension currently receives £9,340 a year, which would rise to £10,087 from next April if average earnings growth reaches 8% this year, as the Bank of England has stated is possible, and if the government applies the current ‘triple lock’ rules.

There has been recent speculation that the government may abandon the triple lock, the promise to raise State Pension by the highest of three measures – the rise in Consumer Prices Index (CPI), the rise in average earnings, or 2.5%.

However, Just Group’s analysis showed that even after applying a theoretical 8% rise, State Pension income would still be £730 a year short of the £10,816 Minimum Income Standard, the annual income needed to provide an acceptable minimum standard of living.

“While to many an 8% increase in the State Pension will seem extraordinarily generous, our analysis shows even this level of uplift would still not give single pensioners an income the public thinks provides an acceptable minimum standard of living,” said group communications director at Just Group, Stephen Lowe.

“The challenge for many people is how to bridge the gap between what the State offers and what the public considers an ‘acceptable’ standard of living in retirement.

“Many pensioners do not claim their full benefit entitlement and so this should be the first port of call for those who are struggling for income in retirement. Homeowners are more likely not to be claiming all that they are entitled to, with four in 10 not claiming any benefits they are entitled to and an extra fifth not claiming the full amount.

“For those approaching retirement, it is vital that they take a little time to plan ahead.”

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