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Is the Basic State Pension Sufficient?

Is Retirement Income Enough to Pay Bills and Prevent Fuel Poverty?

Jan 9, 2009 Asa Ghaffar

Senior citizens worry whether a retirement income of only the basic state pension will cover outgoings. Will fuel poverty or insufficient grocery money be a problem?

All senior citizens that have paid sufficient national insurance contributions have an entitlement to a basic state pension. Payments aren't related to income over the course of a working life so all those who have paid their contributions will receive exactly the same amount.

Basic State Pensions Rise In Line with Inflation and Not Earnings

Increases are linked to annual increases in the rate of inflation and not earnings. It is a recognised fact that wage levels increase at a faster rate than inflation so senior citizens will receive a lower percentage of their earnings over the course of time.

Is the Basic State Pension Sufficient?

As of the 9th April 2008, it offers a retirement income of £90.70 per week or £4,716.40 per year. According to the Office for National Statistics, the average UK salary is £22,000. If the basic state pension is the only source of income, a retired person will only receive 21.4% of the income they were receiving during their working life.

According to a survey by Friends Provident, excluding rent and mortgages, most people feel that £832 per month is a comfortable income to live on. The survey also found that 75% of 3,056 adults questioned think that the basic state pension isn't sufficient to live on, while 36% feel that they will struggle to make ends meet during their retirement.

Whilst a number of senior citizens own their own homes, many more have always rented. If the statistics are to be believed, the basic state pension would need to double from its current level for retired people to lead a comfortable existence and prevent fuel poverty.

What are Pension Credits?

Pension credits are a means-tested benefit. As of 6th April 2008, they guarantee that a senior citizen receives a minimum income of £124.05 if single and £189.35 should they have a partner. Those that find they are eligible for pension credits are able to back-date payments for up to 3 months.

Basic State Pensions Offer Less Help to Single Seniors

Figures produced by the Office for National Statistics showed that two-thirds of single pensioners live on less than £10,000 per year. Joe Harris, National Pensioners Convention general secretary, said "Millions of older people will be faced with the unenviable dilemma of trying to heat their homes or eat properly."

The basic state pension is just that, a basic pension that needs to be topped up with other money. This is essential if a senior citizen is to pay their bills. Sadly, financial information wasn't as readily available as it is currently so many seniors rely on other state benefits, such as pension credits, to get by.

Those that found this article useful may also be interested in reducing their grocery bill or lowering outgoings through a series of money-saving tips.

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