State Pension to hit £9,627 a year from April – here’s how you can get DOUBLE that income | Personal Finance | Finance

The Government’s decision to scrap the triple lock this year means pensioners get an increase of just 3.1 percent, while inflation heads to 6 or 7 percent. Those who retired under the old State Pension, before April 6, 2016, have even more reason to feel aggrieved.

They will get a maximum State Pension of just £7,376 a year, plus any second State Pension or Serps entitlement on top.

This is well below the £10,900 a year a single pensioner needed to enjoy the bare minimum retirement living standard in 2021, while couples required £16,700, according to the UK Retirement Living Standards survey.

To get the most out of your final years, make sure you qualify for the maximum State Pension, by making 35 years of qualifying National Insurance contributions.

You can further top up your state entitlement by building a nest egg of pensions and other investments in your own name.

If you could save enough to generate a further £10,000 a year, retirement might start to look a bit more fun.

So how much do you need in company and personal pensions, and other investments such as tax-free Isas?

To generate income of £10,000 a year for life, a single person needs a retirement pot of a staggering £230,000, according to Laith Khalaf, head of investment analysis at AJ Bell.

“The State Pension may only pay a basic level of income but it’s more valuable than many people realise, especially when you see how much you must save to match it.”

His figures assume you invest your money via income drawdown, as most new retirees do these days, and it grows by 4 per cent a year after charges.

This should allow you to increase your income by 2 per cent every year.

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Khalaf said the State Pension provides a valuable foundation for retirement, but offers little for luxuries, he says. “The State Pension age is set to rise to 68 in the coming decades, putting even more onus to save yourself.”

To enjoy a comfortable retirement, today’s workers need to save early and often, investing in shares and equity funds to build their wealth, alongside lower risk options such as cash and bonds, Khalaf said.

The lucky ones also have a workplace pension with employer contributions.

Savers can top this up by investing tax efficiently in a self-invested personal pension (SIPP) or stocks and shares Isa, Khalaf said.

He names three investment funds worth considering for your SIPP or ISA, that should expose your money to a globally diversified spread of companies.

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Fidelity Index World tracks international stock markets and charges a lowly 0.12 per cent a year, while Aberdeen Standard Global Smaller Companies gives you exposure to smaller, fast-growing companies.

You can also use investment funds to generate income in retirement, and Khalaf tips two funds: Evenlode Global Income and Threadneedle UK Equity Income. “For a lower-risk option, consider a multi-asset fund like Personal Assets Trust.”

Less than 40 percent of Britons are on track for a decent retirement, according to the new Hargreaves Lansdown Savings and Resilience Barometer.

This requires annual income of £20,800 in retirement and Hargreaves Lansdown senior pensions and retirement analyst Helen Morrissey said: “Most people would like to think they will afford a few luxuries here and there during retirement, but without action many face only the most basic standard of living.”

The golden rule for retirement saving applies to everyone: invest as much as you can, as early as you can.