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Retirement

One in seven will retire with no personal pension

Lucinda Beeman
Written By:
Lucinda Beeman
Posted:
Updated:
11/04/2014

One in seven people planning to retire this year has no personal pension provision, according to Prudential, and will be totally reliant on the state for their retirement income.

Nearly one in five will have an income below the minimum income standard as defined by the Joseph Rowntree Foundation, which estimates that a single pensioner needs an income at least £8,600 to maintain an acceptable standard of living, while couples require £12,500.

Vince Smith-Hughes, retirement income expert at Prudential, said: “The changes to pensions and how people can take their retirement income announced in the Budget last month will provide savers and retirees with more choices. However, they don’t alter the fundamental fact that people are not saving enough for a comfortable retirement.”

Women are nearly three times more likely to retire on just the state pension than men. It makes up 42 per cent of women’s expected retirement incomes compared to 28 per cent for men, while company pension scheme income makes up only 27 per cent compared to 42 per cent for men.

There is also confusion among those soon to retire about how much their state pension is worth. Some 39 per cent either have no idea or think they will receive more than the £113.10 a week payable from April 2014.

Smith-Hughes said: “It is important to avoid falling into the trap of overestimating the contribution that the State will make to your retirement income, as the State Pension alone is barely sufficient.”

He concluded: “The introduction of auto-enrolment into workplace pension schemes is helping to encourage saving, and along with plans for a flat rate state pension from 2016, small steps are being taken to improve retiree’s prospects. However, simply saving as much as possible as early as possible in your working life and seeking professional financial advice in the run up to retirement will help to make the most of your savings when you’re ready to stop working.”