‘State Pension shortfall day’ highlights £5,000 income gap

Official figures suggest the average retired couple’s spending power is £21,770 a year, while the full State Pension for a retired couple brings in £16,593, effectively covering just over three-quarters of annual spending.

That leaves a financial gap of £5,177 a year compared to the budget of a normal retired couple, that needs to come from private pensions, savings and investments.

Stephen Lowe, group communications director at Just, said: “The State Pension provides a significant part of income for most pensioner households but still only covers about three in every four pounds that the average couple has available to spend over the course of a year.

“For a couple receiving the full State Pension – and many will not – that leaves around £5,000 of income to be generated, according to our analysis. This further highlights the importance of people building up workplace and private pension savings to balance the household budget, and of having savings and investments to fall back on.

“Of those accessing pension benefits seven in 10 are aged under 65 and, of those around 60% take a full cash withdrawal. That’s fine if they have other sources of capital or income, but many people struggle to save enough into a pension. Taking it out of the pension years earlier than necessary could well harm its future income potential.

“We hope that highlighting ‘State Pension shortfall day’ will help people better understand what they can expect from the government and what they are expected to be responsible for themselves.”