A third of British workers will hit retirement in poverty

By Al Mayadeen English
Source: Agencies
28 Jun 2023 16:54

The large number of pensioners unable to secure minimum living standards comes despite vast state pension spending.

A senior woman volunteer sorts through donated clothes at the Hackney Children & Baby Bank storage center in London, UK (AFP)

A third of the UK's workers will retire in poverty despite the £110 billion annual cost of the state pension, a British pension institution warned, The Telegraph reported on Wednesday.

According to the Pension and Lifetime Savings Association PLSA, each retiree requires at least £12,800 in yearly pension income to “live with dignity."

However, falling below the saving threshold means that hundreds of thousands of people will prevent these individuals from meeting the minimum living standard, pension body Scottish Widows has warned.

Peter Glancy of Scottish Widows, said, “Our national retirement forecast paints a stark picture – one in three of us are facing the harsh reality of a retirement where we will struggle to make ends meet.”

Glancy added that a rising number of pension recipients will enter retirement without owning a home.

“Rental costs will eat up most or all of their income from their pension, leaving them relying on state benefits to make ends meet.”

According to the report, rental costs currently make up as much as 70 percent of pensioners’ retirement incomes, and even as much as 130 percent in London.

The PLSA standard retirement requirements assume that retirees own their own homes, which will leave pensioners with substandard living conditions facing a huge gap between spending needs and actual income.

This comes despite a hike in government cash assistance pension funds, which rose to almost 10.1 percent in the recent few months.

Official data suggest that while state pension today is at £110 billion per year, it is expected to reach £150 billion before the end of the decade.

Institute for Fiscal Studies estimates that spending per pensioner will reach £10,534 in 2023, compared to £2,658 per working-age individual.

While spending on state pensions is currently at 4.8 percent of GDP, a previous report requested by the government recommended that this number should be capped at 6 percent, however, it is expected to reach 8.1 percent in five decades.

However, Scottish Widows said while one in three people would not reach living requirement standards after their retirement, a close number will secure a comfortable lifestyle.

A 6 percent limit would mean that the state pension age would have to increase to 69 between 2046 and 2048.