5th April 2016
The state pension remains a hugely valuable benefit which would cost hundreds of thousands of pounds of saving and investing to build up the same amount privately.
With the new single state pension of £155.65 per week goes live on 6 April 2016, the cost to buy this state pension is £243,000 for a man at 65 and £264,500 for a woman at 63 according to research from pension firm Aegon.
From 6 April, someone with 35 years of full rate National Insurance contributions will be entitled to the new single state pension of £155.65 per week or £8093 a year.
The firm stresses that as a result of historically low interest rates and improved life expectancy, annuity rates are currently at an all-time low which has increased the amount consumers would be required to save.
Aegon research indicates 59% of individuals expect half or more of their retirement income to be made up of their private or workplace pension provision than from their state pension. This means they need to target a private pension fund of over £240,000 to match their state pension.
Steven Cameron, Pensions Director at Aegon says: “The new single state pension goes live on 6 April and with all the controversy over winners and losers and complicated transitional arrangements, people may be forgiven for not realising just how valuable a benefit it will be.
“A male wishing to buy the equivalent of the full single state pension of £155.65 a week from age 65 would need to have built up their own fund of £243,000. Because women currently reach their state pension 2 years earlier at age 63, they’d need to have saved even more – £264,500.
“Our research shows that the average someone has in their private pension is much lower than this. The average for men sits at £49,000 while for women it is considerably lower at £20,000.
“The introduction of the new single state pension should be a prompt for people to review their retirement aspirations against what they will receive from the state and then act to begin plugging any gap.”