How would you cope living off £179.60 every week? This has to include your essential bills, food and other discretionary spend. This is the value of the new state pension and the income you would have if you reached the state retirement age of 66 (currently) with no other forms of savings. A scary thought right?
Faith Archer and I are starting a state pension challenge today in collaboration with our partners over at PensionBee. From Monday 27th September to Sunday 3rd October we are going to do our absolute best to live our week on £179.60. We want this challenge to be fun to follow, with regular updated on Instagram and Twitter, but with a serious undertone of a stark warning. Of how challenging it will be to live off only this state benefit every week for the remainder of your life beyond 66.
Faith and I love a challenge, Faith regularly takes part in challenges including the Ration challenge and I am currently also doing a 28 day no alcohol challenge (great timing to combine no booze with an extreme budget challenge). We are both keen spending diary keepers, and have compared these several times over lockdown for content features with PensionBee. This state pension challenge should be easy for us. Um maybe not.
Firstly the pension amount we receive. We are assuming that we have both contributed 35 years of national insurance and will receive the full state pension. You can check yours here.
Of course there are rules and assumptions for the state pension challenge expenses. The biggest assumption being about mortgage or rent. We are assuming that we will have paid off our mortgage and have no rent to pay. Currently a reality for Faith, a distant dream for me, in fact my current mortgage has 25 years remaining taking me to 70. Eek, but I have a plan to change this, currently well in motion with operation downsize.
We are also going to assume that we don’t have children living at home with us so children’s costs (clubs, childcare, school travel) can be excluded. I am going to assume that I forever remain single (I really hope not!) and Faith will assume that she stays married. I will assume that I have a cat for some company.
Also going to assume that insurance costs such as income protection and life insurance have stopped, as by this point I am mortgage free and have an income to draw for the remainder of my life. Hopefully by then I won’t be working so business costs are not included in this challenge.
Everything else is in.
How Much Cash do I actually have for the week?
The bills that I will still be paying as at age 66 include the following, based on my current monthly spending divided by 31 days in month * 7 days for a week :-
Council Tax £33.87
TV License £3.02
Mobile Phone £7.99
Gym Membership £13.55
Car Tax £2.77
This leaves me with £83.23 from the £179.60 state pension amount. There are a few controversial non essentials in here. Gym membership at £13.55 or £60 per month. I most likely cannot afford this as a pensioner, but I want to leave it in as I still intend to be fully active, with the gym providing essential life extending exercise and a social life with all the ladies I’ll befriend in yoga and aquafit.
Also Netflix, should I leave this in as well as the TV Licence? I figure I’ll need TV entertainment more so when I’m not working, so Netflix stays in.
Car Costs are staying in for me. I cannot imagine ever living without a car. Car Tax is above. My Car Insurance is pay as you go and I will include fuel costs for the miles I drive.
Also can I do a little rant about council tax. As a single person I get a 25% discount, my £200 a month bill goes down to £150. But if I was in a couple that £200 is split 50/50 £100 each. A single person tax. And its the biggest bill out of everything!
What will my £83.23 cover?
This will cover my food for the week, my car fuel and pay as you go insurance. Plus any other discretionary spend. Diary wise its a pretty normal week, but I have amended plans to suit this budget. I am seeing a friend on Wednesday night, but she will come to mine for dinner. She is bringing food and I’m providing her with a bed for the night, rather than her book a hotel.
I have a wedding in the diary on Thursday night, but eekk I’m not sure I can do a wedding where I know just the bride and will be sober. I’m going to cancel that one. I have a training course on Friday in Hitchin where I will park in a secret place that I know is free parking and they are providing food, I paid for a it a few weeks ago.
I have a PensionBee event commitment in London on Saturday (where they will cover my travel) followed by a meet up with a friend. My friend and I have agreed to meet in a London park with picnic food that I will bring from home. I also have a date, maybe he’ll pay;-). Who knows what else will come up that I need to pay for?
Its going to be very hard! I know that much!
You can read Faiths take and assumptions on her State Pension Challenge on her website here.
Please be aware that any form of investment can go up and down. You may want to consider advice from a qualified IFA. Just make sure they come recommended by a trusted friend and check their investment levels. Some will only work with clients with an investment level of at least £150k. This post was written in collaboration with PensionBee. Capital at Risk.