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The state pension is shocking. But this is how you can protect yourself

The British state pension – the income that the government pays to retirees – is pretty lousy in every way. For starters, it's only £ 168.60 a week. And that's when you qualify for the full amount. Many people do not do this.

This figure is only £ 8,767 per year, which is not enough to lead even a basic British pension lifestyle. According to the Joseph Rowntree Foundation, a single person in the UK needs to earn at least £ 10,000 a year to achieve an "acceptable minimum standard of living" (ie more than just living and dining).

The UK State Pension is also the worst in industrialized countries, as it pays less than 30% of average income. In contrast, the US government pays its retirees around 50% of the median income, while in Europe, Italy and the Netherlands pay out 93% and 1

01% of the median income, respectively.

The real shock for me, however, is the age of What benefits can you avail? In the past, these were 65 for men and 60 for women. However, the retirement age is gradually increasing and could reach 68 years within the next 20 years.

Stop and think about it for a second. Currently, the average life expectancy in the UK for men is only 79.2 years and for women 82.9 years, according to the World Bank. This means that you do not enjoy a very long retirement if you want to retire in the state pension. Work for the better part of 50 years, and you can retire as a man about 11 years. That does not sound special to me.

How to Protect Yourself

Fortunately, there are ways to protect yourself from state pensions. While the government is receiving a lot of criticism about the bad amount of money it is providing to retirees, many people are unaware that if you're willing to save yourself for retirement, you'll actually be rewarded with a bonus by the government. This is called tax concession.

To receive your share of tax credits, you must either set up and deposit a personal retirement account such as a self-invested personal pension (SIPP) or contribute a company retirement pension. The government will then charge your contributions with part of the money you would have paid as a taxpayer for your income.

Taxpayers with a base rate are entitled to a 20% tax break, meaning if you put £ 800 in a SIPP, you will receive a £ 200 bonus that will increase your total contribution to £ 1,000. Taxpayers with higher and additional tax rates can claim even more tax benefits. Tax relief is really a super deal, and if you make use of it, you can build a nice little nest egg for retirement.

Of course, you also want to make sure that your money works for you within your pension. This means investing in assets that will yield a healthy return over time. If you leave your money in cash, inflation will weaken its purchasing power over time.

Ultimately, your asset allocation is likely to make a big difference to your overall retirement when you retire. If you want to learn more about investing in retirement, you are in the right place.

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The views of the companies expressed in this article are those of the author and may therefore differ from the official recommendations we make in our subscription services such as "Share Advisor", "Hidden Winners" and "Pro". Here at The Motley Fool, we believe that by taking into account different insights, we are better investors.

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