The number of pensioners living in poverty in the UK has rocketed in recent years. A combination of desultory State Pension increases and the booming cost of social care, means that retirees are finding it harder and harder to make ends meet. The dreams that many of us have to retire in comfort are looking pretty fragile at best.
The pressure facing British pensioners threatens to grow in the wake of Covid-19 too. The huge bill to cover the cost of the pandemic has to come from somewhere. It’s why talk about scrapping the ‘triple lock’ pension mechanism continues to do the rounds in government circles. The lock guarantees that the State Pension will rise by 2.5%, by the rate of inflation, or by average earnings growth, whichever is highest.
I couldn’t imagine having to live on the £179.60 per week that the current full State Pension provides. And, as I say, retirees could struggle even more to make ends meet in the years ahead. A report by Standard Life Aberdeen shows how a large majority of British pensioners might struggle to retire in comfort.
Two-thirds risk running out of cash
The study shows that someone planning to retire in 2021 plans to spend on average £21,000 a year going forward. This is around £9,000 lower than the average UK household income of £29,900.
However, Standard Life Aberdeen notes that exactly two-thirds (66%) of retirees “are at risk of running out of money” if they stick to their spending plans. This is based on an analysis of pension pots as well as the amount of money they’ll receive from the State Pension.
The research also showed that 37% of people planning to retire this year are worried about not having enough money to last throughout their retirement. And, staggeringly, 27% plan to work part-time to keep their heads above water.
What I’m doing to help me retire in comfort
It seems then that saving or investing for retirement is essential if you want some breathing space in retirement. I ‘ve chosen to buy UK shares in a tax-efficient Stocks and Shares ISA to try and retire in comfort. It allows investors up to £20,000 a year without having to give anything to the taxman.
History shows that UK share investors make an average annual return of between 8% and 10%. This is why I prefer to use a Stocks and Shares ISA instead of a Cash ISA. Moneysupermarket.com shows that the best-paying, easy-access ISA (provided by Paragon Bank) offers a paltry 0.41% interest rate.
Of course, investing in UK shares carries higher risk than putting your money in a standard savings account. There’s nothing stopping the value of your investments going all the way to zero. That said, I still think the returns British stock investors can enjoy still makes share investing a better way to try and retire in comfort.
And there are stacks and stacks of top-quality UK companies — not to mention help form experts like The Motley Fool — to help investors meet their retirement goals.