A new reported published by insurer LV= has found that over six million over 50′s have no private pension provision and will be solely reliant on the state for retirement income. At present the number of retirees living only on the state pension is 1.2 million but this figure could rise sharply in the future as more of the population goes into retirement. The report notes that these 1.2 million retirees have to live on an income that is £5,890 less than the minimum wage. The data also uncovered that 43% of those questioned believed they could not survive financially on the minimum wage. Many of us may look on retirement as a golden era of relaxation coupled with leisurely activities but the reality for many is very different. Even if you consider those who do have a private pension, the average income from this is just £7,488. Couple this income amount with the state pension entitlement and the total income only reaches £11,477, slightly above the minimum wage. The LV= reported also found that 15% of those who are retired or who are intending to retire within 5 years are cutting back on long term savings. The average amount by which people are cutting their savings is nearly £300 per month.
There has also been cuts to the amount of money people are contributing to their private pensions. The average cut in the private sector was £523 per month with the public sector average cut coming in at £164. The problem is worse for women than for men as 37% of women over 50 have no pension provision at all compared with 20% of all men over 50. Ray Chinn from LV= said that it was worrying that so many people were planning to rely solely on the state pension in retirement and said saving could be encourage if people perceived their pensions as a ‘wage’.
Pension credits help the poorest pensioners increase their income but the government is planning to abolish these and instead implement a universal basic state pension of £140 per week. However 66% of those questioned about this in the report thought the changes were unfair as this would reduce the annual income of those who rely solely on the state pension. Many of those approaching retirement within the next five years have over the past year become concerned about their living standards in retirement. They are concerned specifically about rising energy, food and fuel costs which have rocketed in price throughout the course of the recession. Other worries include the poor economic outlook, the impact on inflation and proposed reforms to the pension system. Many are having to delay their retirement plans as they will have to work longer in order to support themselves in retirement. There is also very little support for government changes to the pension rules which include raising the retirement age to 66 by 2020 and abolishing age-related allowances.
