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L&G warns on state pension

Legal & General says the rise in basic state pension is not enough to fund retirement and is warning people to save more into their pension.

The Budget increased the state pension by only 2.3 per cent in line with inflation, giving single pensioners an increase of just £2 a week and couples £3 a week.

L&G says many people are running the risk of making their retirement a time of poverty and is telling consumers they must plan ahead.

Its core messages are not to rely on the state as the sole means of income, to make the most of using a pension to save, to start saving as soon as possible and to make provision even if you do not work.

It says the need to save is extremely important as only three out of four will qualify for the maximum income from the state pension, which is £75.50 a week for individuals and £120.70 for a married couple.

Research found most people would need about 70 per cent of their working income to retire on, highlighting that even half the average income is £225 a week.

It estimates three million people are using bank accounts rather than pensions to save for retirement, meaning they are losing £900m in tax relief. This amounts to £300 per person per year.

L&G is encouraging people who do not work to start saving for a pension by taking advantage of the stakeholder rules which allow anyone to take out a plan.

Pensions strategy director Adrian Boulding says: “The real message is not retire later but start saving earlier. Even people who already save for their retirement could find it beneficial to sign up for their employer&#39s stakeholder to take out their own personal plan.”

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