Pensioners will need to HALVE the cost of their living with the introduction of the New State Pension, according to research.
An in-depth study found millions of Brits will be short of £165.05 per week as they struggle to live on the £155.65 issued to them by the government.
The average person nearing pension age currently spends an average of £320.70 each week on essential living costs such as utilities, bills, rent share, food and clothing.
Assuming the average calendar month has 4.3 weeks this equates to an overall normal spend of £1,379.03 – but those in receipt of the New State Pension, due to launch 6th April 2016, will have to cope on maximum handout of just £669.30.
As a consequence, Brits will be forced to cut their spending on things such as eating out, socialising, house maintenance, DIY and travel by 51 per cent.
Andrew Sheen, editor of online retirement community www.retiresavvy.co.uk, said:
“It’s amazing how many people don’t know how much State Pension they can expect.
“Although the New State Pension that comes in from 6 April is more generous than the system it replaces, it’s still less than half of what the average 50- to 65-year-old currently needs to live on.
“If they get to State Pension Age without having their own plans in place, a lot of people will have a big surprise and face a huge change in the kind of lifestyle they can afford.
“At retiresavvy.co.uk, we worked out the New State Pension is equal to an hourly wage of just £3.57 – that’s less than half the new National Living Wage.
“People need to plan ahead if they’re going to make the most of later life. Retiresavvy is full of great articles that can help people think about how they can make the most of their life ahead.”
Researchers found 42 per cent of people polled had no idea that the New State Pension meant they could receive £155.65 to live on a week.
Two thirds of people aged 50 to 65 say they will definitely have to cut corners by the time they reach pension age – making the biggest cut-backs on things like eating out, treats such as magazines, beauty products and gadgets, clothes and shoes.
Seven in 10 adults admit they’ll have to stop socialising so much when they reach pension age.
Unsurprisingly, a resounding 67 per cent of those polled think the state pension should be higher to assist people with normal living costs.
Four in 10 Brits are “dreading” reaching their sixties, and the same percentage believe that when they retire they will struggle to afford even the most basic costs such as rent, mortgage, utilities and bills.
More than a third of people confess they are burying their heads in the sand when it comes to thinking about how they will cope in their sixties, but as personal finance journalist Annie Shaw has experienced, living on just £155.65 per week presents its problems.
Researchers at retiresavvy.co.uk tasked the money expert to live on the same amount as the new State Pension for one week to see how she would cope with her normal spending habits.
The finance journalist quickly discovered that to get through the week changes would need to be made – including shopping in budget supermarkets, bulk buying food, giving up alcohol, wearing more clothes to avoid putting the heating on, and spending more time in charity shops.
Long term, Shaw concluded pensioners would need to consider finding help elsewhere to meet council tax payments, and moving into smaller and cheaper and accommodation.
Annie Shaw from www.retiresavvy.co.uk said: “Living on a reduced income is not impossible, but it is a challenge because you have to think about everything you do. You can’t just toss an extra dessert in your shopping basket in the supermarket or give up waiting for the bus and hail a taxi.
“It is very wearing to be creative constantly with diet and entertainment – and often physically hard work too. If you are disinclined to cook and don’t have a car I can see how it would be easy to live on canned soup, and never go out if the bus service is awful or non-existent. Very isolating and depressing.
“I also recognise that foraging in the hedgerows and flitting round the “reduced price” sections of supermarkets may be fun now, but is not really going to be an option in extreme old age.
“For people to manage on the New State Pension without falling into debt, they may have to scrimp and save permanently.
“I would advise anyone who still has time to put savings aside for themselves for their retirement to do so, so they can relax and enjoy their later years.”
CURRENT COST OF LIVING PER MONTH PER PERSON AGED 50-65
|FoodSocialising with friends and family
Exercise, sports, clubs and hobbies
Utilities, insurance, council tax and bills
Mortgage or rent
Clothing and shoes
Gifts for others
Credit cards and loans
House maintenance, DIY and gardening
TOTAL CURRENT SPEND PER MONTH
TOTAL MONTHLY NEW STATE PENSION
£155.65 X 4.3 (average weeks in a month) £669.30
Normal spend per week = £1,379.03 / 4.3 weeks = £320.70
£709.73 / 4.3 weeks = short of £165.05 per week