Millions of pensioners £200,000 short of surviving on ‘basic’ retirement

Pensioners now face a £200,000 shortfall to fund even the most basic retirement as the state pension fails to keep pace with the cost of living.

Single pensioners will need almost £100,000 more if they own their home and more than double that if they rent, while couples are also looking at huge deficits.

According to annual data published by the Centre for Research in Social Policy (CRSP) at Loughborough University, the Minimum Income Standard (MIS) is now £14,366 a year for single pensioners and £22,292 for couples.

Similar to the consumer prices index, it includes a “basket of goods and services” that retirees need, from clothing, food and fuel to council tax, water rates and socialising. It enables them not to just survive, but to live with dignity.

The measure does not include any money for tobacco, motoring or care for grandchildren. It also only includes just £6.63 a week for alcohol – which can just about cover the cost of a pint of beer in London.

However, analysis of the figures by The Telegraph – backed by the CRSP – shows there are six figure shortfalls between the minimum standard and the state pension over the course of an average retirement.

A mortgage-free pensioner living alone on the state pension would currently receive £10,600 a year, thanks to a 10.1pc rise in the state pension for 2023-24 provided by the “triple lock” guarantee.

However, this would still leave an annual shortfall of £3,766 compared with the MIS, meaning that for a 25-year retirement they would need an extra £94,150 just to get by.

For single pensioners who rent their home, the lifetime gap they face has spiralled from £141,803 in 2021 to £211,155 now.

Couples who are mortgage-free have also been dragged into a deficit of £27,300, a huge increase from the surplus of £47,226 they could enjoy two years ago.

Couples who rent will now have to find £156,000 between them, up from £65,627 in 2021.

The figures apply to people drawing the full state pension, but many still do not qualify for it.

According to a Freedom of Information request from equity release provider Responsible Life last year, a quarter of people do not receive the full old state pension, while half do not receive the full new state pension.

Matt Padley, who worked on the figures at CRSP, said: “Pensioners receiving the full state pension find themselves falling short of the income they need to live with dignity in the UK today.

“Rising costs over the past couple of years, particularly for things like home energy and food, have really squeezed household incomes, and pensioners have not been protected from these pressures.

“Around a fifth of pensioners don’t have the income they need to meet a minimum living standard, [they are] unable to meet all their basic needs and at far greater risk of feeling excluded and isolated.”

In the Budget, Jeremy Hunt, the Chancellor, announced another 2pc National Insurance cut that put money in the pockets of every worker, along with a 3pc cut for the self-employed.

But pensioners, who do not pay NI, were excluded from the tax cut.

Immediately after the Budget, the Resolution Foundation said that every single one of the UK’s 8m pensioners would pay more tax because of the freezing of income tax thresholds, leaving them £1,000 worse off by 2027-28.

The Government has since confirmed its ambition to scrap National Insurance altogether in another move that doesn’t benefit pensioners, and which Labour says will cost £46bn.

The average income tax bill for retirees has already risen by £400 since 2010.

With the freeze on tax thresholds due to remain in place until at least 2028, this is set to increase further.

Carole Easton, of the charity Centre for Ageing Better, said: “It is extremely concerning that the state pension is not sufficient to cover even the most basic standard of living.

“We are reaching a real crisis point and something needs to change.”