Recent research by insurance giant Prudential has claimed that thousands of people will retire into poverty this year. Almost 20% of people taking their state pension this year will be entering retirement on a total income of less than £8,254. (The level defined as poverty by the respected Joseph Rowntree Foundation).
This year one person in seven people retiring will rely solely on the state pension alone for income. State pension, which is worth around £5,750 per annum expected to account for 36% of the average retirement income in 2013.
The Pru’s retirement expert Vince Smith-Hughes has said: ‘Against a backdrop of rising living costs, the basic state pension alone is not nearly enough to provide a comfortable standard of living. It is a source of income for millions of pensioners, the state pension should ideally only represent a part of someone’s retirement income, not all of it’.
The findings also highlight a gender divide, with 21 per cent of women expected to retire below the poverty line this year, compared to 14 per cent of men, which reflects the fact that men are more likely to have workplace or personal pensions.
Parsonage estimate that Pensioners at age 65 with a money purchase type Pension plan will need to have built up a retirement pot worth more than £210,000 to retire on a private pension income of around the current minimum wage of £12,115.20.
Apparently, the average annual income Britons would feel comfortable receiving at 70 is £25,200. The issue is that, based on current savings levels, an average person retiring at 65 is only like to receive about £3,860 a year in pension income. Even when topped up with the state pension, this would provide a yearly income of only about £11,400.
The average Pension pot at retirement, estimated to be around £30,000, is a fraction of the £210,000 required to generate an income equivalent of the minimum wage.
Less than half of Britons are saving enough for their later life, according to Scottish Widows. They commissioned a survey of 5,200 adults which found one in five Britons is saving nothing at all towards their old age. Many adults in this country are also heading towards their retirement burdened by credit card debt, loans and mortgages a worrying number may have to turn to credit or rely on support from their families to see them through those later years.
It has been suggested that in 10 years’ time 70 will be the normal retirement age, as more and more Britons are forced to work later to provide enough income for those twilight years.
Gordon Morris of Age UK enterprises said ‘If people want to enjoy a comfortable retirement, saving as much as possible as early as possible is important, while seeking advice from a financial adviser or retirement specialist can also help to make the most of retirement income.’