22nd May 2015
One in seven people are set to retire this year with no pension and will be totally reliant on the state.
Research by Prudential reveals 15% of those planning to retire this year will be totally or heavily dependent on the state to fund their retirement income.
Furthermore, one in six retiring this year will do so with expected incomes below the Joseph Rowntree Foundation’s minimum income standard for adequate living of £9,500 for a single pensioner. A pensioner relying on the state pension will receive £6,000 a year.
A retired couple without any personal pension provision who both qualify for the full state pension will receive £231.90 a week, taking them just above the poverty line. The most common measure of the poverty line is 60% of median household income, which is currently calculated at £224 a week after housing costs.
On average, the state pension will provide 36% of the income received by those retiring in 2015 and although it makes up a significant chunk of their income, many are unsure of how much it is worth. Two in five think it is worth more than its current value and 8% have no idea of its worth.
Woman are more than twice as likely to have to rely on the state pension or other savings – 21% of women say they have no other pension savings compared with 9% of men.
Women expect the state pension to make up 41% of their retirement income on average, compared with 31% for men.
Prudential retirement income expert Vince Smith-Hughes said the pension freedoms mean retirees have more choice but ‘only those with their own pension savings will be able to benefit from the new choices, while people who rely solely on the state pension are likely to have to face serious financial belt-tightening when they give up work’.
‘For many people reaching the retirement milestone this year, their income will come form a number of sources,’ he said. ‘Our research shows that the state pension will make up a significant proportion of income for most people –but it is important not to overestimate its value.
‘To secure a comfortable retirement income the best approach remains to save as much as possible as early as possible during your working life.’