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Nearly one in seven people retiring this year (14 per cent) have made no provision for their retirement, according to new research from Prudential.
This includes 11 per cent who will be either totally or somewhat reliant on the state pension when they stop working.
This leaves them embarking on their retirement with an income which is up to £1,400 a year below the Joseph Rowntree Foundation’s (JRF) Minimum Income Standard for a single pensioner.
The findings are part of Prudential’s study which tracks the finances, future plans and aspirations of people retiring in the year ahead. This year’s retirees – the Class of 2017 – provide the tenth annual set of insights into the post-financial crisis retirement landscape.
For women planning to retire in 2017, there is some good news as they are closing the gap on men when it comes to retirement income expectations. Although this year will see more than double the proportion of women (19 per cent) retiring without a pension than men (nine per cent), it is an improvement on 2016 when women (22 per cent) were more than three times as likely as men (seven per cent) to retire without a pension.
JRF’s Minimum Income Standard for a single pensioner of £186.77 a week is a benchmark of the income required to support an acceptable standard of living in retirement. A pensioner retiring after April 6, 2017, and relying solely on the new flat-rate state pension, would have a weekly income of £159.55, or nearly £8,300 a year – falling short of the minimum standard by £27.22 a week or more than £1,400 a year.
Stan Russell, retirement income expert at Prudential, said: ‘The state pension is a vitally important component of pensioners’ incomes – especially as the triple lock ensures that it increases in value every year. People throughout their working lives should be doing everything they can to ensure that they are entitled to the full amount of state pension, including making voluntary National Insurance contributions to cover any missing years.
‘However, for many working people the state pension will always be viewed as just one aspect of retirement planning. It is, therefore, concerning that some pensioners who are due to retire this year will rely solely on the state pension and will face retirement incomes of £1,400 below the Joseph Rowntree Foundation’s minimum level required to live comfortably.
‘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.’
Prudential’s research also highlights the significance of the state pension to this year’s retirees – including those with retirement savings of their own. On average, people expecting to retire this year estimate that the state pension will account for more than a third (35 per cent) of their income in retirement.
Those members of the Class of 2017 who have a pension of their own include: 42 per cent who have the majority of their pension savings in a workplace final salary scheme; one in eight (13 per cent) who’ve saved in a workplace defined contribution scheme; and 13 per cent who have savings in a personal pension not through their employer. The remainder hold the majority of their savings in a Self-Invested Personal Pension (six per cent) or a stakeholder pension (six per cent).