State pension warning as 740,000 retirees to ‘run out of money’ and face £1,427 a year retirement shortfall

Pensioners who rely solely on the full state pension are facing a growing income gap, with the annual payment falling £1,427 short of what is needed for even a basic standard of living.

The state pension currently pays £11,973 a year, while Pensions UK estimates that a single retiree needs around £13,400 annually to meet its minimum retirement living standard.

When that shortfall is spread across the year, it means the state pension would effectively run out by November 22. Retirement specialist Just Group has dubbed this date “State Pension Shortfall Day”, highlighting how early many pensioners fall behind on essential costs.

Analysis of Office for National Statistics data by Just Group shows the scale of the issue. More than 1.2 million retired households in the UK are now economically inactive and mainly dependent on state pension income.

This includes around 740,000 single pensioners and approximately 500,000 households with two retired adults.

The ONS defines a household as “mainly reliant” on the state pension when at least three quarters of its total income comes from the state pension or similar pension-related benefits.

Based on this definition, around 740,000 single retirees are currently exposed to the £1,427 annual gap between their state pension income and the minimum level required to cover basic living costs. For many in this group, returning to work is simply not a realistic option.

David Cooper, director at Just Group, said: “The data from the ONS highlights the significant number of pensioners who are mainly dependent on the State Pension and other benefits to support them throughout retirement.”

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He added: “Pension UK’s minimum income standard is nearly £1,500 higher per year than the current State Pension and demonstrates the gap that hundreds of thousands of retirees need to bridge to achieve a minimum standard of living.

“For many of these people it is not be feasible for them to find employment, leaving them with little choice but to tighten their budgets by nearly £119 a month.”

The Department for Work and Pensions figures indicate that close to one million pensioners are failing to claim Pension Credit, a benefit specifically designed for those on lower incomes.

This unclaimed support averages £2,600 annually and could substantially improve living standards for eligible retirees.

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Mr Cooper noted that checking eligibility for additional benefits represents one way pensioners might bridge this income gap.

He said: “One way people may be able to bridge the retirement income gap is by checking if they are entitled to additional benefits.

“For many, this extra income could significantly improve retirement living standards, so it’s vital people check if they’re eligible for unclaimed support.”

Pensions UK defines the minimum retirement standard as covering essential needs while leaving some funds for leisure activities, including a week’s holiday within the UK, monthly restaurant visits, and affordable recreational pursuits twice weekly.

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Stephen Lowe, group communications director at Just Group, added: “The state pension has seen significant increases in recent years and provides a solid foundation of income in later-life which, as this research shows, is likely to cover the majority of retirees’ essential spending.

“However, it is clear that people will need to hold a substantial amount in pensions or other savings to top up the state pension in order to achieve the lifestyle in retirement many may want.”