Will there still be a state pension when I retire?

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What’s the difference?

State pension is what the government gives you – currently the maximum is £168.80 a week if you’re over 66 and have worked in the UK for 35 years

Workplace pension is what your employer set up – you pay in 5% of your wages and they pay an extra 3%

Private pension is something you set up yourself – for every £80 you save, the government adds an extra £20


Will the state pension come to an end?

The Government Actuary’s Department (GAD) estimates that the UK’s state pension fund could run dry by 2033. Quite simply because we’re paying out more than we’re putting in.

The money for state pensions comes mostly from National Insurance contributions, and currently there are 1,000 contributing workers to every 310 claiming pensioners. By 2036, this is expected to rise to 1,000 workers to every 360 pensioners. If we’re already going overdrawn now, this could be the straw that breaks the Treasury camel’s back.

Of course, nobody knows for sure what will happen, so don’t start panicking yet. Besides, it’s not like the government will let a huge chunk of the population go cold and hungry, or introduce a Logan’s Run policy, or get Thanos to snap his fingers. If it gets as bad as the GAD expects, the government will do something about it. But this ‘something’ probably won’t be very cosy. It’s far better to start protecting yourself now.


Surely the UK pension crisis isn’t that bad

Sorry to break it to you, but the UK is already bottom of the OECD (Organisation for Economic Co-operation and Development) global pensions league table. According to the OECD, today’s state pension is the equivalent of 29% of average earnings. Mexico is second lowest with 29.6%, Poland follows with 38.6%, and even Chile pays out 40.1%. Compare this to the top of the table – 100.6% in the Netherlands and 94.9% in Portugal – and you can see how bad the UK pension crisis really is.


What can you do instead to prepare for retirement?

Whether the state pension eventually hangs up its boots or not, the reality is that it was never going to be enough to live on anyway. Currently at only £168.80 a week, that just about stretches to cover the average person’s food and utility bills. If you have a mortgage, rent to pay, or the desire for a social life, the state pension alone is not enough.


Your workplace pension is a good place to start

However, if you only pay in the minimum amount each month (5% from you, 3% from your employer), that too is probably not going to be enough. After all, it would take over a decade of setting aside the minimum to build up only one year’s salary (ignoring the returns you hope to make on your pension investments), and how quickly do you usually spend that?


We recommend you also take out a private pension

For every £80 you save into it, the government will add an extra £20. Plus, the sooner you start saving, the more time you’ll have for the money to grow. You can start with as little as £25 a month, so why not take a few minutes to learn the basics with our private pension guide. Then, once you know what you’re looking for and you’re ready to choose a provider, read reviews by independent experts and real-life customers in our Best Buys comparison tables. It’s too easy and important to ignore.


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