Triple lock looks unsustainable as state pension recipients rise to 13.1m – how to build your own retirement savings

New figures from the Department for Work and Pensions (DWP) show the number of people receiving state pension has risen to 13.1 million, up more than 200,000 in just one year.

The figures emphasise the ever-increasing challenge of sustaining the state pension triple lock. This guarantee saw average payments rise by nearly £17 a week last year, and persistently high inflation and wage growth are expected to boost state pension payments by at least 4% next year.

The triple lock ensures that the state pension rises in line with the highest out of CPI inflation, wage growth or 2.5%.

The aim of this is to ensure state pension payments keep up with the rising cost of living, but it is extremely expensive for the government. The triple lock is expected to cost around £15.5 billion a year to maintain by 2030, according to the Office for Budget Responsibility.

Political parties are loathe to consider scrapping or altering the mechanism for fear of backlash, but it is getting increasingly difficult to fund this sustainably. This is also not going to get any easier with an increasingly ageing population. Reform is urgently needed to ensure there is a state pension that continues to work into the future.

One way the government is attempting to reduce costs is by increasing the state pension age, but this will mean future retirees will need to either retire later or fund their retirement with more of their own savings.

How to build your own retirement savings

While there is nothing to suggest the state pension is going anywhere, it’s always a good idea for savers to build up their own retirement pot that they can rely on in later life.

If you are employed, make sure you’re enrolled in your workplace pension scheme. This will ensure you benefit from contributions from your employer and get a boost from the government via ‘pension tax relief’.

If you are self-employed, open a personal pension and start contributing regularly. You can opt for a regular personal pension, where your investments are managed on your behalf, or a Self Invested Personal Pension (SIPP), where you pick your own funds or stocks from a wider range of investment options.

You won’t get employer contributions in a personal pension, but will still benefit from pension tax relief to boost your pot. Check out our top picks for personal pensions and SIPPs.

Track down your old pensions from past jobs to ensure you know how much you have saved and aren’t missing out on any cash.

Consider consolidating them to one pot to keep track of your savings and ensure you are getting the lowest fee. We have a free pension tracing service in partnership with Gretel you can use to trace your old pensions – you just need your name and address.

Increasing your contributions to your pension over time can also massively boost your pot. If you saved £50 a month into your pension, growing at 5% a year after charges, you would accrue £76,301 over 40 years, having saved £24,000 of your own money. But if you increased your payments by 2.5% per year, you would save a total of £109,671, while only saving £40,000 of your own money.