State pension: £2,600 shortfall expected for basic retirement income

interactive investor calculations, based on the PLSA Retirement Living Standards, show that the expected state pension in April 2024 (£11,501) still falls £2,642 short of the amount needed for a basic retirement income.

• Amount needed for a basic income in retirement is £14,143 – ii calculation based on PLSA Retirement Living Standards
• Current state pension is £10,600, leaving a £3,500 shortfall
• The expected state pension in April 2024 is £11,501, still leaving a £2,642 shortfall for those relying on the state pension alone in retirement.

Alice Guy, Head on Pensions and Savings, interactive investor says: “The state pension rise is great news for millions of pensioners and will make it easier for them to pay the bills in a time of soaring inflation. But for the millions of pensioners who rely on the state pension alone, the rise won’t be enough provide even a basic standard of living in retirement.  

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“Before 2012, it wasn’t compulsory for all employers to offer a workplace pension. That means many of today’s pensioners don’t have any income apart from the state pension and rely heavily on state pension rises to keep their finances afloat. Pensioner poverty is sadly more likely among women, who are less likely to have pension wealth and more likely to rely on the state pension in retirement. Our research in our recent report, Show Me My Money, shows that 28% of over-55s expect the state pension to be their only source of income in retirement.

“And millions of older pensioners receive much less than the headline state pension figures as the higher “new state pension” was only introduced in 2016. Older pensioners who retired before April 2016 are only due to receive £8,816 next April – their income will fall an enormous £5,330 short of the amount needed for a basic income in retirement.

“It’s important for those still working to save into a workplace or private pension to supplement the state pension as the state pension alone won’t be enough for a comfortable retirement.”

How we worked out our calculation

Our calculation of how much you need for a basic income is based on the PLSA Retirement Living Standards 2022, which were based on inflation up to April 2022. We have uprated this amount using CPI inflation figure up to September 2023.