Today is State Pension shortfall day

28 August 2019

28 August marks the date that an average retiree would run out of State Pension money


Today is State Pensions shortfall day. But what does this mean?

State Pensions shortfall day is the day in the calendar year when an average-spending retiree would run out of money, were they to be given a year's worth of State Pension on 1 January and nothing else for the rest of the year. 

This means the average retiree will have to make up a 125 day shortfall with their own private savings. 

The full State Pension for an individual pensioner is £8,767 a year. However, the average over 65 spends £13,265 per year - an extra £4,498. 

While in practical terms this is not how people receive State Pension payments, the day highlights the fact that there is a shortfall of around one third on average for retirees' expenditure. 

Stephen Lowe, group communications director at Just Group comments: “The average retiree given their whole year’s State Pension on January 1st would run out this week and have to start relying on their own funds.”

"Pensioner couples, assuming they both qualify for full State Pension, will receive £17,534 a year compared to average annual expenditure of £26,244. That leaves a shortfall of £8,710 they would need to find from private funds to meet the average budget, roughly equivalent to another full State Pension.

“The figures show the State Pension remains the bedrock of retirement income for most pensioners, paying for about two-thirds of their annual outgoings on average. They also show how important it is not to rely solely on the State Pension, but to build up private pensions through a working life and use that money wisely during retirement.”


Nationwide current account changes

Are you aware of the changes Nationwide is introducing? All of their current account overdrafts will switch to a rate of 39.9% EAR/APR from 11th November. That's not an overdraft rate, that's a bad credit card rate! Also the £250 fee-free 'buffer overdraft is abolished, plus those accounts paying credit interest e.g. FlexPlus will now pay nothing.
Previously FlexPlus had an odd overdraft structure, charging a flat 50p per day. Which meant it paid to use it to the max, or not at all. It also paid good deposit interest up to max £2500 balance. As a pensioner living off SIPP dividend income, and too young to receive State pension, I use the overdraft to cover times when there are fewer dividends being received. The alternative is to keep uninvested cash within the SIPP, which earns zero interest. So where to move to please? Need an account with a large overdraft facility on good terms!

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