New research has found that people on the UK state pension only just break even amid the rising cost of living, despite an increase in the Autumn budget.
The research, conducted by pension advisors Almond Financial, looked at the current state pension in comparison to the average cost of living in the UK. Almond Financial 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, just 16.61% above the pension income breakeven point. The state pension pays just £114.28 more than the average cost of living for a pensioner, but as the cost of living crisis rages on, the monthly costs are expected to rise significantly over the coming months, leaving pensioners very little wiggle room.
The maximum UK state pension will increase in April 2023, to pay a total of £883.35 per month to retirees and at the time of writing, recent data stated that the monthly cost of living for a single person (excluding rent) is £688.04, although this is expected to rise significantly over the coming months.
Topping the European Pension Breakeven Index is Spain. 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 state pension. Coupled with the country’s low cost of living, pensioners can expect a comfortable retirement in the sun.
Rounding out the rest of the top five is Belgium, Luxembourg, Bosnia and Herzegovina and Cyprus.
European Pension Breakeven Index (Top 20)
|Rank||Country||Pension paid outper month in £||Cost of Living Monthly Costs in £||% above/below the pension income breakeven point|
|4||Bosnia and Herzegovina||£979.72||£411.20||238.26%|
Principal financial adviser at Almond Financial, Sam Robinson, commented:
“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.”
Five ways to maximise your 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% of your pension will be tax-free cash although any future withdrawals will be taxable.