New state pension will not provide you with a comfortable retirement on its own

Speaking at our Pensions Outlook Seminar in Manchester today, Malcolm McLean said it was important for both advisers and individuals not to over-estimate the value of the new state pension in planning their retirement.

The single-tier state pension being introduced for new pensioners from April 2016 was welcome for its relative simplicity and as baseline to encourage private saving without the risk of overlaps with means-tested benefits.  But it was highly unlikely to be sufficient on its own to guarantee anything approaching a comfortable retirement.

Expected to be set initially at around £155 a week (or £8,000 a year) the full rate of the new pension would exceed the main current means test threshold but with little margin to spare.  In the early years from 2016 it was also likely that many new retirees would receive less than the full rate either because of deficient NI contributions (the single-tier requires 35 qualifying years up from 30 as now) or because of the necessity to make deductions from the foundation amount for earlier periods spent "contracted-out" of the state second pension.

The recent report and research from AgeUK entitled "Financial Resilience in Later Life" underlines the need to encourage and support private pension saving - especially for those in the age bracket 50 to 64 many of whom are seriously under-provided for in financial terms and are consequently ill-prepared for retirement from work.

This generation will not have had time to benefit materially from the roll- out of auto-enrolment - particularly if their contributions if any have been limited to the specified minimum- and without boosting their private saving substantially now may have to contemplate working on past normal retirement age or face a fairly financially insecure old age on the state pension alone.

Follow Malcolm on Twitter