Average retirement income is below minimum wage
With an average pension income of just £8,774, new retirees can expect their income to drop by two thirds upon leaving the workplace, says LV=.
This is an annual income of almost 24 per cent less than the minimum wage, according to LV=’s ‘State of Retirement’ report.
Richard Rowney, LV= Life and Pensions managing director, said: “Brits approaching retirement today are under huge financial pressure, as their retirement savings are being stretched over a much longer period of time than before. While undoubtedly having a longer retirement is a good thing, it means that making the right choices on how to fund your retirement is now one of the biggest financial decisions you have to make.”
The report indicates that working Brits are choosing to delay their retirement rather than put more money away; 85 per cent of workers aged 60 to 69 who have changed their retirement plans in the last 12 months say that they now expect to retire later than they had planned.
Retirees are also leaving the workforce with more debt. LV= found that 12 per cent of retirees have credit card debts, while 7 per cent have an outstanding mortgage and 5 per cent are overdrawn.
Rowney explained: “It’s clear that today’s retirees leave work with far more financial commitments to contend with than previous generations, meaning their money has to go further for longer. Given that the age at which you stop earning a wage can have a significant impact on how much you have to fund your post work lifestyle, it’s not surprising that many are choosing to delay retiring.”
He concluded: “The Chancellor’s latest Budget has given retirees even more choice and greater flexibility as to how they use their pension fund. Although the vast majority of people will experience a drop in income when making the transition from working life to retirement, considering all the income options available and seeking financial advice will help to ensure that retirees are able to make the most of their savings and select a solution that best suits their needs.”