Retirement Savings Deficiency for Unmarried Individuals Reaches £2,000: Bridging the Gap Strategies
Planning for Retirement: Single vs. Coupled-Up
It's not just about love and companionship that singles may miss out on during the holiday season. Retirement savings could be another significant aspect where couples have an edge.
According to the Pensions and Lifetime Savings Association (PLSA), a decent living standard in retirement requires an income of £14,400 per year. However, a single person, with a full state pension of approximately £11,502, might face an income shortage of around £2,897 to meet the minimum threshold. To tackle this gap, a 65-year-old single would need a pension fund of around £50,000.
Things get tougher when aiming for a moderate standard, which is estimated to be £31,300, rising to £43,100 for a comfortable retirement. A couple, on the other hand, would fare better, with both receiving full state pensions and an additional £604 a year to reach the minimum standard.
Being coupled-up doesn't always guarantee a financially rosy retirement, but it certainly presents advantages. According to Stephen Lowe, group communications director at retirement specialist Just Group, "The figures reinforce the importance of building up some private pension savings or other investments while you are working and then using them wisely when you reach retirement."
Plugging Your Pension Gap
Planning your retirement wisely can help close these gaps. Married or partnered individuals can combine their savings and share costs, which can lead to economies of scale not available to singles. Beyond romantic benefits, there are also tax benefits to marriage.
However, a partner is not a prerequisite for securing your financial future. A single person can still take charge of their finances. One way is to increase pension contributions, allowing the money to grow in the stock market and augment your retirement portfolio.
Small pension funds might tempt some to withdraw them early, but Lowe advises against it, suggesting that these funds could make the difference in reaching the minimum retirement living standard or going beyond it.
Another strategy is to work longer, increasing years of contribution and deferring your state pension, which can result in a larger income later. Daniel Wiltshire, Independent Financial Adviser at Wiltshire Wealth, points out that retirees can choose to defer their state pension, increasing their annual income by around 5.8% for every nine weeks they delay claiming it.
It's also crucial to fill any gaps in national insurance (NI) contributions to boost your state pension entitlement. Usually, you can fill gaps for the past six years, but due to a special concession, you can claim back from April 2006 to April 2018. Act quickly, as this opportunity ends in April.
In the pension race, every missing year is a hurdle. However, with the right choices, you can secure a finish line of financial stability. Beyond government pensions, private investments in a diversified portfolio can offer a more flexible approach tailored to risk tolerance, time horizons, and financial goals.
- A single person may need to focus more on private pension savings or other investments to meet the minimum living standard in retirement, as stated by Stephen Lowe, group communications director at retirement specialist Just Group.
- While combining savings and shared costs can lead to economies of scale for couples, a single person can also secure their financial future by increasing pension contributions and filling any gaps in national insurance contributions to boost their state pension entitlement.
