By Dale Critchley, Policy Manager, Aviva
25th May was ‘State Pension Survival Day’. It’s the day when someone on the average UK salary (£26,676) has already earned, after tax, the equivalent of a full year of state pension payments (£8,546.20).
Imagine if that was it. You would not get paid again until the start of 2019. Could you survive until the end of the year on what you have earned up until this point?
We actually did a vox pop with a few people about this (you can watch the films here) and got some interesting responses:
“Probably not to be honest. There’s always far too much month left at the end of the money.”
“In the woods, gathering berries and hunting….maybe that way I could. But unless I put my kids into the mines, probably not, no.”
“Definitely not, no. I guess my lifestyle is a little too extravagant. I’m a vegan and I do buy a lot of speciality products, so no, I don’t think so.”
“No, I wouldn’t be able to pay my mortgage, pay my bills, live in general.”
“No way. I struggle sometimes just to get to pay day.”
The vegan one did take me by surprise, but it does illustrate the lifestyle considerations that need to be factored in when looking at pension saving and retirement.
There is of course a serious message in all this. In its current form, the full state pension pays £165 a week. That is not going to give anyone a particularly comfortable life unless they have some other financial means to top it up.
While I said earlier that the positive message about pension saving doesn’t seem to be getting out there, it doesn’t mean pension participation is suffering.
In fact, thanks to auto-enrolment, the number of people saving into a pension is at the highest it’s ever been. Many of them need to be saving more, but we need to approach this one step at a time.
I guess my frustration is that people aren’t really interested in their pension when really they should be. Yes, it’s a 40+ year savings project for some people, but it could end up being your most valuable asset.
The pensions industry has to do more to make it interesting of course, and work is underway to do that. But until the message does get through, we’ll continue to come up initiatives like ‘State Pension Survival Day’. I hope they go some way in helping people understand that if they want to have a more comfortable retirement, they need to start thinking about it now and not six months before they’re planning to stop work.
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