1 million pensioners relying solely on state pension face £1.4k shortfall

Single pensioners reliant on just the full new state pension would, in theory, run out of money this weekend if their spending aligns with recognised minimum living standards, analysis suggests.

The full new state pension is £11,973 in 2025/26. But a single pensioner requires an annual income of £13,400 to achieve the ‘minimum’ Pensions UK Retirement Living Standards.

Spreading both the full new state pension and this ‘minimum’ expenditure evenly across a twelve-month period leaves a shortfall of £1,427 a year, according to analysis by retirement firm Just.

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On this basis, the state pension theoretically runs out on 22 November this year – known as ‘state pension shortfall day’. Under this modelling, from this day onward to the end of the year, retirees would have to fall back on private income – like a workplace pension or Sipp (self-invested personal pension) or other savings like ISAs to bridge the gap left by their state pension. In reality, the state pension is paid every four weeks.

Alternatively, those reliant solely on the state pension – some 1.2 million UK pensioners, according to research in 2023 by Just – would have to eke the payment out at a level below Pensions UK’s minimum Retirement Living Standards in order to make it last the whole year.

Pensions UK defines the ‘minimum’ Retirement Living Standard as covering all of a pensioner’s needs, with some left over for fun and social occasions, including a one week holiday in the UK, eating out about once a month and some affordable leisure activities about twice a week.

Stephen Lowe, group communications director at Just Group, said: “In a year in which the government launched both a State Pension Age Review and a Commission to consider pensions adequacy, Saturday 22 November marks the day in the year when a single pensioner living to a ‘minimum’ standard of living would theoretically run out of money if their only source of retirement income was the state pension.”

Who is dependent on the state pension?

Over a million retired households in the UK are largely dependent on the state pension for their retirement income, according to analysis of Office for National Statistics (ONS) data by Just in 2023.

The data reveals 1.2 million retired households are “mainly reliant” on the state pension,

defined by the ONS as a household that has at least three quarters of its total income provided by the state pension or other similar pension-related state benefits.

Single pensioners account for the majority of these households largely reliant on state pension income, with a worrying gender imbalance showing that three times as many women (580,000) as men (180,000) rely primarily on the state pension.

Two-person retired households account for around 450,000 households largely reliant on state pension.

How much do I need for a comfortable retirement?

Pensions UK, formerly the Pensions and Lifetime and Savings Association (PLSA) regularly puts out figures showing how much it costs to fund a minimum, moderate and comfortable level of retirement.

While Pension UK estimates a single person needs £13,400 for a minimum standard, for a moderate standard of retirement living this increases to £31,700 a year and for a comfortable retirement it jumps again to £43,800.

The figures are for an estimated expenditure, not an income. They assume you own your own home with no mortgage – so you may need to add or reduce other costs depending on your circumstances, such as mortgage, rent or social care costs and any income tax on your pension.

While the figures are only a guide, they show retirees would have to find significantly more annual income above the state pension to achieve the higher ‘moderate’ or ‘comfortable’ Retirement Living Standards.

Pensioners aspiring to the ‘moderate’ or ‘comfortable’ Retirement Living Standards will need to save significantly more to generate the income to fund expenditure of £19,727 and £31,927 a year, respectively. This assumes they get the full new state pension.

Those who only have retirement income from the full new state pension would face running out of money much earlier in the year if their spending was aligned with these two higher Retirement Living Standards.

Lowe added: “The state pension has seen significant increases in recent years and provides a solid foundation of income in later-life which, as this research shows, is likely to cover the majority of retirees’ essential spending.

"However, it is clear that people will need to hold a substantial amount in pensions or other savings to top up the state pension in order to achieve the lifestyle in retirement many may want.”