The state pension should be a huge part of retirement planning, even when it seems a measly amount. The benefit is guaranteed and is normally increased by at least inflation every year. While it’s unlikely to be enough to fund your whole retirement, it is effectively the most secure income one can have after they stop working.
A comfortable retirement, with three weeks abroad in Europe a year and a £144 weekly food shop, requires a single person to have an annual income (net of tax) of £37,300, according to the Pensions and Lifetime Savings Association, a trade body. That’s £26,700 income a year to find on top of the maximum state pension of £10,600 for 2023-24. A couple need £54,500, leaving them £33,300 short assuming they both receive the full state pension.
But to ensure you have enough income, it’s important to explore how the state pension affects retirement planning. It will change the decisions you make regarding how you use your other pension pots. Ian Millward of Candid Financial Advice explains: “Most people have no choice to work until state retirement age but even for those lucky enough to contemplate early retirement, the state pension is crucial to both their security and decision making.”