Nearly one in seven retiring with no financial safety net
Nearly one in seven people retiring this year have made no financial provision for their retirement, and more than one in ten will be either totally or partially dependent on the state pension when they stop working, according to new research.
The analysis, published today by life insurance company Prudential, shows that thousands will enter into retirement this year with an income that is up to £1,400 a year below the Joseph Rowntree Foundation’s minimum income standard for a single pensioner.
That standard, set at £186.77 a week, is established by the Foundation – a social policy research and development charity – as a benchmark of the income required to support an acceptable standard of living in the UK.
The Prudential research shows that a pensioner retiring after 6 April this year and relying solely on the new flat-rate state pension would have a weekly income of £159.55, or just short of £8,300 a year. On average, those expecting to retire this year estimate that the state pension will account for more than a third of their total income in retirement.
But while the data indicates that retirees could be facing a pension squeeze in coming years, it also shows that the gender gap, while still significant, is narrowing. While 19 per cent of women retiring this year will not have a pension, dramatically outnumbering the 9 per cent of men, it is a marked improvement on 2016 when women were more than three times more likely to retire without a pension than their male counterparts, according to Prudential.
Of those retiring in 2017 who have a pension of their own, 42 per cent have the majority of their pension savings in a workplace final salary scheme; 13 per cent have cash in a workplace defined contribution scheme and 13 per cent have savings in a personal pension scheme, not through their employer.
During his Budget statement earlier this month, Chancellor Philip Hammond confirmed a rise of 2.5 per cent in the state pension from April, which translates into £3.90 more a week for pensioners on the flat rate. But some said that the move was unlikely to counteract the problem of people not saving.
“The fact that the Chancellor did not take the opportunity to simplify pensions could well put more people off saving for their pension,” Saga director Paul Green said at the time. “Pension saving lifetime and annual limits are complex and deter people from saving for their retirement and we feel this regulation should have been abolished in the Budget,” he added.
Stan Russell, retirement income expert at Prudential, echoed Mr Green’s comments in today’s report. “While saving is not always easy, especially when the multitude of costs in everyday life get in the way, it is important to try to save as much as you can from as early as you can, to help to avoid financial struggles during retirement,” he said.