Millions of State Pensioners at risk of shortfall of more than £2,000

State Pensioners are set to lose out on over £2,000, according to new research. The government's commitment to the Triple Lock will see the maximum state pension rise from the current £11,502 to £11,973 per annum. However, this falls significantly short of what's needed for a comfortable retirement.

The Pensions and Lifetime Savings Association suggests that a single person requires £14,400 annually to maintain a minimum living standard in retirement. Meanwhile a moderate standard requires around £31,300. The triple lock ensures state pension payouts increase each new financial year by one of three measures - whichever is highest: wage growth, inflation or a flat 2.5%.

The anticipated £460 increase next year is based on a wage growth of 4.1%, considerably above the minimum increase threshold. The Office for Budget Responsibility has flagged the triple lock as a 'fiscal risk' due to its 'ratcheting effect', which can put significant pressure on public finances through escalating pension costs.

The Institute for Fiscal Studies argues that the triple lock makes it challenging to predict government finances due to its three components. Additional complexities include the precise number of recipients with a full National Insurance record claiming the full state pension and the number of years they will be claiming.

Current estimates for spending on the triple lock by 2050 range dramatically from £5 billion to £45 billion annually, owing to these uncertainties.

Should alterations be made to the triple lock, the Financial Times has suggested that tying state pension increases solely to earnings growth - a 'single lock' - would be a more equitable and sustainable approach than the current system. The Organisation for Economic Co-operation and Development (OECD) has also proposed that pensions should be adjusted in line with the average of earnings growth and CPI inflation, supplemented by additional means-tested support for less affluent

Meanwhile, it was found that one in 10 pensio nsavers with a defined ontribution (DC) workplace pot is planning to increase their contributions this year. The PLSA suggested this could reflect an increased awareness in the need to invest in retirement funds.

Zoe Alexander, director of policy and advocacy, PLSA, said: “The start of a new year is the perfect time to reset financial goals and, while everyday needs such as reducing spending or saving for short-term plans often take priority, it’s encouraging to see people across different age groups turning their attention to pensions.

“Younger savers are focusing on building strong financial habits early, while those approaching retirement are prioritising reviewing their plans to ensure they’re on track.

“Those with defined contribution pensions are more likely to need to take positive action themselves to secure the retirement they expect, as saving at the default 8% may not get them there.

“Small changes – such as reviewing investment choices, increasing contributions by even a small amount or making sure they are taking advantage of employer matching contributions – can make a real difference over time. These pensions offer valuable opportunities to build a secure future, but taking action early is key.”