The New State Pension works out to a ‘wage’ of just £3.57 an hour. Could you live on that?
Could you live on a wage of £3.57 an hour? What would you have to go without to make ends meet?
The £155.65-a-week New State Pension comes into effect from 6 April 2016 and retiresavvy has calculated that it works out to an hourly rate of just £3.57.
This got the retiresavvy team thinking - how easy would it be to live off the New State Pension alone? Research from Skipton Building Society shows that this is no mere speculation, as one in four (24%) people say the State Pension will be their main pension income in retirement.
We want to raise awareness of what it would mean to live on the State Pension alone through the #357challenge.
The retiresavvy team and top financial journalists have been living the #357challenge for the past few weeks – looking at what we spend day-to-day and whether we could survive on the New State Pension alone.
You may think it sounds easy, but if you take the weekly amount and turn it into an hourly wage, based on an average working week of 43.6 hours, it equates to just £3.57 – less than half the £7.20 National Living Wage.
Personal finance journalist Annie Shaw took the #357challenge and tried to live on the same amount as the New State Pension to see how she would cope with her normal spending habits.
She says: “Living on a reduced income is not impossible, but it is a challenge because you have to think about everything you do. It is very wearing to be creative constantly with diet and entertainment – and often physically hard work, too.
“Flitting round the ‘reduced price’ sections of supermarkets may be fun now, but is not really going to be an option in extreme old age. I wouldn’t want to do it permanently, and I’m full of admiration for those who have no choice but to manage it without falling into debt.
“I would advise anyone who still has time to put savings aside for themselves for their retirement to do so, so they can relax and enjoy their later years.”
Will you have to tighten your belt?
Our research, conducted with polling organisation OnePoll, shows the average person nearing pension age will need to halve their spending if they are to live on the New State Pension.
We found the average 50 to 65-year-old spends £320.70 a week on essential living costs such as utilities, bills, housing, food and clothing – which would leave them short of £165 a week if they had to live on just the New State Pension.
Living on a reduced income is not impossible, but it is a challenge - I wouldn’t want to do it permanently
While four in 10 people said they would be okay as they have other financial plans in place for retirement, almost one in six respondents said they would never be able to cope, while one in five (21%) worried they would need to find an alternative form of income.
Perhaps unsurprisingly, two thirds of people aged 50 to 65 say they will definitely have to cut back on spending by the time they reach pension age – making the biggest cut-backs on things like eating out, treats such as magazines, beauty products and gadgets, clothes and shoes. Seven in 10 adults admit they’ll have to stop socialising so much when they reach pension age.
Thinking about how far the New State Pension goes in terms of a £3.57 hourly wage:
- At £2.95 a cup, a takeaway cappuccino would cost you 50 minutes’ ‘State Pension wage’.
- A £50 meal out for two would cost over 14 hours’ ‘State Pension wage’ – about a day and a half.
- Seeing the latest blockbuster with popcorn could set you back about 3.5 hours’ ‘State Pension wage’ (and more than 5 hours’ to watch it in 3D).
- Fancy getting a round in? You’d better make that drink last, as a pint, glass of wine and a G&T in a typical pub could cost just under 4 hours’ ‘State Pension wage’.