Last month, the UK government announced an increase to the state pension in April 2025. While any boost is welcome news for eligible retirees, this serves as a timely reminder of the importance of forward planning to ensure a comfortable and secure retirement. Relying solely on the state pension will not be enough to meet your future financial needs.
UK state pension to rise
The one in four retirees in the UK who are eligible for the new state pension will receive an inflation-beating boost to their income in 2025 to the tune of £470 per year.
From April 2025, the new state pension weekly payment will go up from £221.20 to £230.25, bringing the annual figure to £11,973, compared to the current £11,502. That’s a 4.1% increase and compares favourably to
The new state pension is received by eligible men born on or after 6th April 1951 and women born on or after 6th April 1953.
Those born prior to these dates receive the basic state pension, which will also rise, although less generously. It will go up from £169.50 to £176.45 per week representing an annual rise of £360, from £8,814 to £9,175.
The figures were announced in the Autumn Budget, Labour’s first since being elected earlier in the year. Financial guru, Martin Lewis, announced the proposed rise on his Money Saving Expert website in September 2024 with a warning about the difficulties faced by those depending on their state pension to survive.
Don’t rely on a UK state pension!
While an increase to the state pension is always welcome news for retirees, an extra £470 a year won’t go far. With the cost-of-living crisis still raging, for those relying solely on a state pension, this additional income will only help ease the difficult choice Lewis highlights, between heating and eating.
His comments underline the reality of life for those whose sole source of income in retirement is a government pension.
The State Pension is designed to cover basic living costs, such as food and utilities. Whether it even does that is debatable. What is certain, however, is that it is not sufficient for a more comfortable retirement that includes leisure activities, holidays, or unexpected expenses.
Unless you have alternative sources of income in retirement, you will almost certainly need to adjust your expectations regarding the standard of living.
And if compromising on living standards is not your bag, retirement planning is the only answer.
How to plan for retirement – three steps UK expats can take today
Check your UK state pension eligibility
While not affording anyone a life of luxury, a UK state pension is still a potential boost to your pension which shouldn’t be ignored! For most retirees, £12,000 a year is a welcome addition to any retirement plan.
If you have paid into the UK’s National Insurance scheme for 10 years or more, you will be eligible for a pro-rata UK state pension, regardless of how long you have lived abroad. It’s definitely worth checking your NI record, which you can do here.
At present, many UK expats can opt to pay voluntary class 2 contributions while living abroad in order to acquire the 35 years required to be eligible for a full UK state pension. The rate in 2024-25 is just £3.45 per week!
You can also apply to backpay voluntary contributions for the past six years AND until 5th April 2025, eligible men born after 5th April 1951 and women born after 5th April 1953 can backpay voluntary contributions to make up for gaps as far back as April 2006. The clock is ticking on this though so you’ll need to get your skates on.
It’s well worth taking the time to assess your situation and ascertain whether it is worth opting to pay voluntary contributions going forward and/or back-paying to plug any gaps. If you need help with this, contact your Infinity financial adviser.
Assess your pension requirements
If you haven’t already done so, it’s essential to establish just what your financial requirements will be when you retire. You’ll need to work out:
- Your retirement goals – when and where do you want to retire? What kind of lifestyle are you hoping for when you stop working?
- Your timeline – when are you hoping to retire? Is this timeline realistic? Could you risk running out of money in retirement?
- Your sources of income in retirement – these could include a state pension, workplace or personal pensions, property investments, and other investments
- Your estimated expenditure in retirement – What are your current spending habits, and how will they change in retirement? Don’t forget to account for inflation and factor in any large one-off expenses, such as home renovations or assisting family members.
- Potential shortfalls – If there’s a gap between your estimated income and expenditure in retirement, you will need to consider your options to make up the shortfall. These include increasing pension contributions, seeking a higher return on your investments or adjusting your retirement timeline.
By identifying any gaps early, you’ll have more time to take steps to bridge them and secure a more comfortable retirement.
Put together a retirement plan with a financial adviser
Let’s not pretend that putting together a retirement plan is easy. There’s a reason that many people put their heads firmly in the sand and fail to plan ahead. But the ostrich approach will come back to bite you in the future.
A better strategy is to get help with this difficult but crucial task.
That’s what financial advisers are for, and you don’t need to be a millionaire to work with one. In fact, it’s arguably more important to plan ahead if you aren’t a super high earner and don’t have millions in the bank because you need any savings that you do have to be working as hard as possible for you.
Here at Infinity, we have clients from all backgrounds earning vastly different incomes. However much you earn, if you need help planning for retirement, we can help.
Our advisers not only possess a wealth of experience in advising expatriates with cross-border issues to take into consideration but also have tools that can simplify the tasks of estimating income and expenditure in retirement. They will help you to identify gaps in your retirement planning and find the right solutions to bridge them.
If you don’t have a retirement plan or you have doubts about a plan you have in place, don’t delay – every day that goes by makes planning for retirement more difficult.
Contact us today to set up a free, informal chat with one of our advisers to find out how we can help you secure a comfortable retirement
A leading provider of expat financial services and wealth management services across Asia.
