A new report has shown that 6.25 million people, aged over 50, will retire with the State Pension as their only form of income.
The State of Retirement report from pension provider LV= (Liverpool Victoria) clearly demonstrates the lack of provision many people have made for their retirement.
Below the minimum wage
When Pension Credit, the basic State Pension and the Second State Pension are combined they currently produce an annual average income of £9,672; nearly £2,000 below the full time minimum wage of £11,477 per year.
The situation will improve little when the new flat rate State Pension of £140 per week is introduced.
At present some 1.5 million people live solely on the State Pension and Pension Credit with no form of additional pension income, if the LV= figures are correct that number is set to soar of the coming years.
Savings cut backs
The report also found that pensioners and would be retirees had actually cut back the amount they saved or invested each month. According to LV= 15% of existing pensioners and people planning to retire within the next five years have reduced their long term savings by the equivalent of nearly £300 per month.
Ray Chinn, the head of pensions at LV=, said: “It is worrying that so many people are saving little or nothing for their retirement ‘wages’, instead expecting to fall back on the state pension.”
“While working hard up to their retirement to bring home a decent wage, I’m sure many will be disappointed to retire with an income equivalent of less than the minimum wage. If more people reflected on their pension as a ‘wage’ that they will potentially be relying on for over two decades, they might feel more inclined to plan ahead.”
The report clearly demonstrates a gap between expectations and reality; 43% of people surveyed said they could not live on the minimum wage alone, whilst another 27% said they would struggle.
Despite this it is clear that many pensioners will have to cope with income less than the minimum wage and furthermore, huge numbers are doing nothing about the problem.