K. WOODWARD PERSONAL FINANCE
  • Start
  • Bio
  • WealthBlog
    • Books
    • Random Thoughts
    • Femail
    • GirlBanker
  • MyBooks
  • MoneySpot
  • Coach

Life in Old Age, Pensions And Poverty In The UK – What Does It Look Like?

2/8/2016

0 Comments

 
Lots of scary statistics get thrown around regarding the negative retirement prospects for current 30-somethings (and even worse for those younger than us), so this week I’ve decided to dig deep. I’ll write a series of 3 articles on retirement: what do that the stats look like in the UK and the US and ultimately, what will it cost you to retire?

I will not do an article on retirement stats in Africa because for the most part those statistics are VERY hard to come by. However, I found a fantastical article by the OECD that looks at Pensions In Africa.
 
This is what I assume we all want to know:
  • When Do You Get A UK State Pension?
  • What’s The Amount of The UK State Pension?
  • How Much Does The Average Pensioner Actually Have In The UK?
  • What Do The Pension Savings of Workers In The UK Look Like?
  • What Proportion Of Pensioners Own Their Home Outright?
Picture

When Do You Get A UK State Pension?

​The retirement age used to be 60 for men and 65 for women. It’s now been equalized to 65 for both. It’s moving up to 66 by 2020, 67 by 2028 and 68 by 2046.
 
I’ll qualify to get a UK state pension at the age 68 in 2051 provided I’ve paid national insurance (NI) taxes or have NI Credits. You can calculate your own pension age here.
 
What does this mean?
 
Those of us that reach retirement age after 6 April 2010 need to have 30 “qualifying years” to get the maximum state pension and at least 10 qualifying years to get anything at all.
 
If you don’t have a National Insurance record before 6 April 2016 you’ll need 35 qualifying years.  Qualifying years are years in which:
  • you were working and paid National Insurance or
  • you were getting National Insurance Credits, e.g. for unemployment, sickness or as a parent or carer or
  • you were paying voluntary National Insurance contributions –
 
For instance, if you work abroad or aren’t working for any reason you can pay voluntary contributions to ensure you qualify for a full state pension. I see this as a sort of backup insurance policy and I would definitely do it if I was working abroad.
 
“If you reached the pension age before April 2010, then a woman normally needed 39 qualifying years, and a man needed 44 qualifying years during a regular working life to get the full state pension.” BBC

What’s The Amount of The UK State Pension?

​If you are retiring on or after 6 April 2016 the full state pension you can get is £155.65/week, this is £8,094/year or £675/month.
 
This amount is guaranteed by the government to rise by the higher of:
  • earnings - the average % growth in wages (in Great Britain) or
  • prices - the % growth in prices in the UK as measured by the Consumer Prices Index (CPI) or
  • 2.5%
 
But, of course, government plans do change and this guarantee could fall away if the UK hits problems. There is a lot of press surrounding this possibility right now. 

How Much Does The Average Pensioner Actually Have In The UK?

​People retiring in 2016 expected income of £17,700 per annum according to a Prudential survey. They carry out this survey annually and the table below shows the results.
 
This number is actually £1,000 lower than in 2008 but it’s been making a steady recovery:
Picture

What Do The Pension Savings of Workers In The UK Look Like?

According to Partnership the average UK pension pot stood at £87,724 in 2015. There is a lot of variance within the UK, with Essex having the highest pension pots, £125,478, and Shropshire the lowest, £44,336. Check out where your region stands using the image below.
 
With compulsory workplace pensions now in effect pension savings should hopefully rise for a good majority of people.
Picture

What Proportion Of Pensioners Own Their Home Outright?

Property ownership is one of the key determinants of financial independence in old age.

​Here are stats from the 2011 census carried out by the Office of National Statistics:
  • There are 23.4 million households in the UK.
    • Out of these 7.2m were retired households (The FT, quoting the same census)
  • 15 million are homeowners (64%) and 8.3 million are renters (36%)
  • Of the 15 million homeowners, 7.2m homes were owned outright while the remaining 7.8m were mortgaged
  • 31% of owner occupied homes were documented as being inactive, i.e. not looking for work and of these 92% were retired
    • We can therefore extrapolate that 2.05 million (7.2 x 0.31 x 0.92) retired households own their home outright and 2.22 million retirees have a mortgage.
  • 36% of renters were documented as being inactive and around 50% of these were retired
    • We can therefore extrapolate that 1.5 million (8.3 x 0.36 x 0.5) retired household rent their home
  • These extrapolated figures are very back of the envelope but we can assume based on these that 35% of retired people in the UK own their homes outright { 2.05 / (2.05+2.22+1.5) }, 25% rent and 40% have a mortgage, possibly a small one.
 
The obvious advantage of outright home ownership when you are retired is that you save yourself what is usually a household’s biggest expense.
 
Home ownership is almost necessary to guarantee a comfortable retirement because state pensions rules are changing all the time.
 
Personally, I hope for the best when it comes to state pensions but I certainly won’t depend on the government to look after me in old age.
Picture
Click To Become A Property Mogul
Have a business or life question you want me to answer? Please email it to me with the subject “Question”. Note that all such questions will be answered as a blog post and will be sent to my full email list. 

Want to start a business? Check out The Money Spot Program.
 
References
Basic State Pension Overview (gov.uk)
State Pension Eligibility (gov.uk)
State pension: The overhaul and you
The pension pot map of the UK revealed
Retirees in 2016 expect income of nearly £18k a year
Home ownership and renting in England and Wales
Number of UK working-age households drops for first time
​
Pensions In Africa
0 Comments



Leave a Reply.

    RSS Feed

    Heather on Wealth

    I enjoy helping people think through their personal finances and blog about that here. Join my personal finance community at The Money Spot™.

    Categories

    All
    4% Rule
    About
    Accounting
    Action
    Admin
    Airbnb
    Amazon
    Ask Heather Katsonga
    Assets
    Attitude
    Beauty Industry
    Black Culture
    Black Economics
    Branding
    Budgeting
    Business Cash Flow
    Buy To Let
    Careers
    Cars
    Cash Flow
    Change
    Children
    Content Creation
    Credit Karma
    Credit Score
    Critical Illness Cover
    Dave Ramsey
    Decreasing Term Insurance
    Defined Benefit Pension
    Diversification
    Earning More Money
    Ebay
    Education
    Emergency Fund
    Energy
    Entrepreneurship
    Equity Release
    Estate Planning
    Etsy
    Experian
    FAQs
    Fear Of Risk
    Fidelity
    Financial Crisis
    Financial Freedom
    Financial Independence
    Financial Planning
    FIRE Movement
    Freelance
    Graphics Design
    Habits
    Halifax
    Hargreaves Lansdown
    Health
    Implementation
    Income
    Initiative
    Insurance
    Investing
    ISA
    Iweb
    Jobs
    Junior ISA
    Legacy Business
    Liabilities
    Life Insurance
    Life Story
    Lodger
    Luck
    Mindset
    Mompreneur
    Money
    Money Mistakes
    Money Spot Program
    Mortgage Insurance
    Mortgages
    Net Worth
    Nurture
    Office Of National Statistics
    Online Selling
    Opportunity
    Organisation
    Parents
    Passion Business
    Patience
    Pensionbee
    Pensions
    Personal Balance Sheet
    Planning
    Poverty
    Priorities
    Priority
    Productivity
    Property
    Racism
    Refunds
    Relationships
    Rental Insurance
    Renting
    Resources
    Retirement
    Risk Taking
    Rule Of 72
    Sacrifices
    Saving
    Self Discovery
    Self Employed
    Self-Improvement
    Side Hustles
    Single Parent
    SIPP
    Sleep
    Social Norms
    Spending
    Stamp Duty
    Start Up
    Start-up
    Stay At Home Parent
    Stock Market
    Tax
    Teenagers
    Time
    Unemployment
    Vanguard
    Wage Slavery
    Wealth Protection
    Will Power

    Archives

    December 2022
    October 2022
    September 2022
    July 2022
    June 2022
    May 2022
    November 2021
    December 2020
    November 2020
    October 2020
    September 2020
    August 2020
    July 2020
    June 2020
    May 2020
    April 2020
    March 2020
    February 2020
    January 2020
    December 2019
    May 2019
    June 2018
    November 2016
    September 2016
    August 2016
    July 2016
    June 2016
    February 2016
    January 2016
    September 2015
    August 2015
    July 2015
    June 2015
    May 2015
    April 2015
    March 2015
    February 2015
    January 2015
    December 2014
    November 2014
    October 2014

Picture

Podcast Links

Wealth Blog 

  • Children
  • Financial Independence / FIRE
  • Pensions
  • Retirement
  • Saving
Buy me a coffeeBuy me a coffee
Picture

© 2007 - 2021, The Money Spot™ ~ Make Money, Change Lives!
Heather Katsonga-Woodward, a massive personal finance fanatic.
** All views expressed are my own and not those of my employer ** Please get professional advice before re-arranging your personal finances.
Photos used under Creative Commons from Got Credit, www.hickey-fry.com, focusonmore.com, Francisco Anzola, SortedForYa, Prachi More, osipovva, Got Credit, focusonmore.com, Free For Commercial Use (FFC), Cory M. Grenier, jerseytom55, Got Credit, wuestenigel, trendingtopics, EpicTop10.com, mikecohen1872, mrmatthogg, focusonmore.com, jijake1977
  • Start
  • Bio
  • WealthBlog
    • Books
    • Random Thoughts
    • Femail
    • GirlBanker
  • MyBooks
  • MoneySpot
  • Coach