State pension warning as payment ‘isn’t enough to live on’ | Personal Finance | Finance
One man fears he will never reach financial independence as his state pension and personal pensions will not be enough to sustain him in retirement.
Trevor, 63, is mostly retired however he doesn’t think he’ll ever be financially independent as he has to earn extra money to supplement his pension income.
Without working two days a week at a warehouse, Trevor explained he would be “existing rather than living,” as he wouldn’t be able to afford any luxuries.
Trevor has been withdrawing from his company pension however it “isn’t enough to live on”.
He took out a lump sum to pay off his mortgage to keep his monthly expenses low in retirement.
However due to the rising cost of living, utility bills, and potential health issues, his monthly pension “isn’t enough to live on” as he wasn’t left with much drawdown after the mortgage.
He said: “There’s not enough money left to save or build. It’s frightening how to three years ago the money was fine, but now because of inflation the money is nowhere near enough to live on.”
Trevor explained that people putting money away earlier in their lives would help more people achieve financial independence sooner.
He said: “Plan plan plan. Put as much as you can in your pension. There are all sorts of ways you can save more that are tax efficient.
“I don’t think I planned well because when you’re 30 you never think you’ll get there but life has gone so quickly.
“People need to see charts and graphs of how well you can do compared to how badly off you could be if you don’t do what you can do when you’re younger.”
New research published today by Wealthify reveals that although a majority of people define financial independence as not having to rely on family or a partner for financial support (44 percent), most still think family wealth (38 percent), household income (36 percent) or social class (30 percent) are the key factors that help people achieve financial independence.
Among 35-54-year-olds, a third (33 percent) still did not consider themselves financially independent.
Financial pressures were the main reason people thought they were unlikely to become financially independent, with increases in the cost of living (58 percent) and not earning enough money (53 percent)) the most cited factors and high inflation (36 percent.)
With rising inflation and the cost of living, Trevor said: “The state pension is not what it used to be”.
Before people could live off the state pension, however now people need extra income and side hustles just to make ends meet.
Andy Russell, CEO of Wealthify, said: “With the difficult economic environment, we’re currently facing, those unable to access extra financial support when they need it, particularly from family, will be the most hard-pressed.
“The truth of the matter is that incomes aren’t rising in pace with inflation, and pockets are being squeezed tighter and tighter, and people are struggling to budget as a result of this.”
Mr Russell continued: “Even with the massive scale of the problem we’re facing, there are small steps people can take to better their chances of becoming financially independent.
“Improving access to financial education, particularly in schools, is vital to ensure that people know how to manage their finances on a day-to-day basis. That could be anything from knowing how to budget, or opening a savings account, so when you’re able to, you can put money aside little and often.
“People understand the positive impact that even a basic level of financial literacy can have on their lives, but far too few have grown up with regular access to financial education.”
