Budgeting on the State Pension: could you live on £179.60 a week?

Picture of a shopping trolley in front of my car

Swapping my car for a shopping trolley

Could you live on £179.60 a week?

That’s the reality if you rely on the full new State Pension in retirement. Well under £10K a year.

It’s also my challenge this week alongside fellow blogger Mrs Mummypenny, in collaboration with our partners at PensionBee, to see how we cope on just the State Pension. From Monday 27 September to Sunday 3 October, we’ll be trying to live on £179.60.

Now, I’ve done spending diary challenges before, based on a month or two. I’ve endured very limited food budgets on the Ration Challenge and Live Below The Line. But surviving on the State Pension covers everything – all bills, all other spending – and it’s not looking good.

Average earnings for total pay were £578 a week in September, according to the Office for National Statistics, which is more than triple the State Pension. Gulp.

Yet 17% of pensioner households do rely entirely on state pensions and benefits for their income, according to the Department for Work & Pensions. Many have to scrape by on less than £180 a week, so I should count myself lucky.

Previous post over on the PensionBee blog: What is pension poverty?

Nowadays, most employees put extra towards retirement via auto-enrolment into workplace pension schemes. However, as I’m self-employed I have to make my own arrangements for anything beyond the State Pension.

I spent most of the first day making a budget and going food shopping, as I faced up to the reality of living on the State Pension for a week.

Screen grab of my State Pension forecast on GOV.UK

Check out my State Pension forecast

Income from the State Pension

I started by checking my State Pension forecast here just to see what I can actually expect to get when I reach 67.

Turns out that based on my National Insurance contributions (NICs) so far, I’m due £152.62 a week at current rates. If I pay NICs for another 5 out of the next 17 years, I will receive the full whack at £179.60 a week, which seems perfectly possible.

I’d always assumed I wouldn’t get a full State Pension, as I contracted out of the state second pension under the old system. However, turns out I should work for long enough after the system changed in 2016 to build up the 35 years of NICs for a full new State Pension.

Budgeting on the State Pension – costs I’ll shed in retirement

Let’s start with the good news.

Many people need less income in retirement because their housing costs are lower, due to paying off their mortgage. We’re incredibly lucky to be mortgage-free and debt-free already, after making the big move from London to Suffolk, so at least I don’t have to cover those bills.

I’m also assuming that my children will have left home, so I won’t face any expenses for feeding, clothing or entertaining them.

As I’m not budgeting for any income beyond the State Pension, I’m assuming I’ve stopped work, so don’t need to allow for any business expenses. Similarly, with no other income, I’m assuming I’m no longer paying into pensions or investments or forking out for investment platform fees. What income I do have is guaranteed, so I won’t be covering life insurance or any other protection insurance.

Picture of the front of our house

Yes but have you seen the heating costs?

Expenditure – chunky essential bills

However, my pension money needs to cover everything else, starting with essential bills.

The bad news is that it’s pretty clear I could not afford to stay in our current home if I was left on my own.

We live in a large four-bedroom detached house, with ridiculous heating and insurance bills due to its age and listing.

Totting up the essential bills, even including a 25% Council Tax discount for a single person, I’d only be left with a tenner a week.

Even splitting bills with my husband still adds up to a chunky amount each week:

£31.06 Council Tax

£6.92   Water

£10.87 Electricity

£22.00 Heating oil

£1.53   TV licence

£0.89   My mobile

£4.12   Broadband and landline

£15.03 Buildings and contents insurance

Total:   £92.42 for essential bills, which leaves a grand total of £87.18 for everything else.

This demonstrates what a raw deal single people face. Guess my husband is stuck with me 🙂

Previous post: How to slash your budget to the bone

Picture of everything I bought for £23.92, laid out on a table

My food for the week: £23.92

Expenditure – food and travel

For most households, their biggest costs after housing are food and transport.

Looking at the limited amount left of my State Pension, it’s pretty clear I couldn’t afford to run a car, with all the costs for fuel, insurance, tax, MOT, servicing, breakdown cover, repairs and any parking charges and tolls. That comes to hundreds of pounds a year I just wouldn’t have.

Messaging my Mum to borrow a granny trolley for the supermarket shop was the first big change to my standard of living.

This also has knock on effects on my food costs. I had originally planned to drive to Lidl or Aldi, to benefit from lower prices at the discount supermarkets. With no car and few buses, I was limited to shops within walking distance, something I didn’t relish looking at the rain outside. Delivery charges for online supermarket shopping may be only a few pounds, but I’d rather spend that on actual food.

Limited cash also means I can’t just chuck anything I wanted into my supermarket trolley. I ended up spending most of my morning putting together a meal plan and shopping list. I could do with shedding some Covid kilos, so am trying to eat healthy meals with higher protein and lower carbs – which isn’t easy when cutting costs.

I’ll do another post on the food side, but I set a £25 food budget for the week and ended up spending £23.92. Woe betide any offspring who raid my supplies, as there’s little room for manoeuvre.

Previous post: 80+ ways to save money on your food shopping

Picture of Otto the cairn terrier looking endearing

Dog or no dog?

Expenditure – little left for everything else

 So, after allowing for essential bills and my supermarket shop, I’m left with £63.26 a week for all other spending.

Everything. Else.

It needs to cover any clothes, shoes, toiletries and cleaning products. The dentist, optician, and hairdresser. Any transport beyond the free bus pass for pensioners. Any work needed on the house and garden. Any eating out, socialising, holidays, hobbies, exercise or entertainment. All Christmas and birthday presents and any charitable donations.

Right now, I’m eyeing up the dog and the chickens, wondering how I’m going to feed them as well as myself.

I therefore spent another chunk of my first day cancelling stuff that would otherwise blow my budget, such as my flute lesson, my language learning app (back to the ad-filled free version of Duolingo) and occasional flower deliveries. I’ve allowed for a TV licence, so it’s hello Freeview and goodbye Netflix, Disney Plus and Britbox. There’s nothing to spare for a cleaner or help with the garden.

Previous post: 5 apps for a fun but frugal lockdown

After a day of cutting back and cancelling stuff, I now need to plan where that £63.26 will go. Roll on day 2.

 

Now – over to you. Any tips for budgeting on the State Pension? Do share in the comments, I’d love to hear.

 

Check out Mrs Mummypenny’s post at the start of our State Pension challenge.

This post is a collaboration with PensionBee  (affiliate link) but all views are my own.

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8 Comments

  1. 29th September 2021 / 7:19 pm

    If you wanted to stay in your lovely house, and especially if you were on your own, something to consider is having a lodger in one or even two of the bedrooms
    My brother does this, letting out 3 bedrooms and sharing the running costs between them. They have a fixed outlay, he doesn’t have to struggle to work ( he has multiple health issues)
    It changed his life!

  2. 29th September 2021 / 8:40 pm

    I’m surprised at the size of state pensions there. Our Social Security, which I assume has a similar purpose will pay my wife and I right at $70K USD or a little over a thousand pounds a week at today’s exchange rate. Part of that is because we elected not to draw until age 70 since by deferring the benefit grows by 8% a year. But that’s only 5 years away and it is 7 times as much income. But it may balance out with free medical care and other state benefits?

    • Faith
      Author
      1st October 2021 / 8:15 am

      Hi Steveark – the UK is known for paying a pitiful state pension compared to many other developed nations, although as you say, free healthcare from the NHS is a major benefit. We are also allowed to defer our state pensions in exchange for higher income, although it’s less generous than you will get and than it used to be. Nowadays in the UK, you get approx 1% for every 9 weeks you defer, which works out at just under 5.8% per year. You used to get 1% for every 5 weeks delay, which is 10.4% for every year.
      https://www.gov.uk/deferring-state-pension/what-you-get

  3. Moira
    30th September 2021 / 2:25 pm

    First off if you have no other income you will be entitled to pension credit but you cannot have a lot of savings. Please continue with your experiment as it will encourage some to prepare for their retirement. We have a company pension from my husbands work and at the moment we are enjoying the Greek sunshine.

    • Faith
      Author
      1st October 2021 / 8:09 am

      Wow Greek sunshine sounds amazing! I did check out Pension Credit, but normally it only applies to lower income levels than the full new state pension – topping up weekly income to £177.10 if single and £270.30 jointly if you have a partner. May still be eligible if on higher income, but if you have a disability, care for someone, have savings or housing costs and I wasn’t assuming any of those things.
      More on Pension Credit, because it is a huge help for those who qualify: https://www.gov.uk/pension-credit/eligibility

  4. Gillian Meehan
    3rd October 2021 / 10:50 am

    We are about to live off our basic state pensions (we also have a savings and property thank goodness) but we want to live for as long as we can on just the 2 basic state pensions and not dip into our savings yet.

    My thoughts are that you should ‘train up’ before you try to live on a much reduced income. In the year before you retire you should aim to live off JUST the statutory pension amount and learn all the tips and tricks needed to lower your living expenses as much as possible ahead of time and the money you’ve saved by doing this will come in handy later.

    • Faith
      Author
      6th October 2021 / 11:38 am

      Good idea about trying to adapt to living on less beforehand, and great plan about building up some emergency savings. Certainly, I found my previous experiences of living on very low income were very useful. Glad you do have savings and property if needed, and all the best when you are living on your basic state pensions.

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