National Living Wage versus the new State Pension

State Pension

One is growing much faster than the other…

The new State Pension has failed to keep up with the National Living Wage in the years since they were both set up in April 2016.

The National Living Wage (NLW) and the new State Pension (NSP) both began in April 2016. Each aims to set an income floor – the NLW during working life and the NSP from State pension age. You might therefore expect their values to be closely related, but that has not turned out to be the case.

  • The NLW has risen by 21.1% since 2016.
  • The rate was originally set at £7.20 an hour, equivalent to £252.00 a week for a 35-hour week. For 2020/21, the rate is £8.72 an hour, which is equivalent to £305.20 a week.
  • In contrast, the pension increased by only 12.6% over the same period – starting at £155.65 a week in 2016 and rising to just £175.20 by April this year.

Gap likely to increase further

Viewed another way, the NSP was 61.8% of the 35-hour week NLW in April 2016, while four years later it will be 57.4%. That difference will probably widen by 2024, with the government objective to raise the NLW even further.

These numbers are further proof that you will need to supplement your State pension with your own savings if you want a reasonably comfortable retirement.




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The information in this article does not constitute advice and should be used for informational purposes only. This content has been provided to Helm Godfrey by Taxbriefs.