Against a background of political wrangling about pension reform, a growing number of UK individuals face an uncertain – and uncomfortable – retirement.
According to a survey conducted by Prudential, 35% of UK individuals who plan to retire in 2011 will have an income below the poverty line. The Joseph Roundtree Foundation estimates a single UK individual needs at least £14,000 a year to live; however, 35% of people aiming to retire in 2011 will have an income below this level.
Meanwhile 19% will retire on a meagre income of less than £10,000 a year. Women appear more likely to find themselves in straitened circumstances: 40% of women will find themselves below the poverty line, compared with 30% of men, while 26% of women will retire with less than £10,000 a year, compared with only 12% of men.
Unsurprisingly, relatively low earners are more likely to struggle with poverty in retirement, as they are less able to build up a nest egg to augment the state pension. The Office for National Statistics (ONS) says only 27% of women and 16% of men in full-time employment and earning less than £300 per week are in a pension scheme.
The ONS also warned that membership of private sector pension schemes has fallen. In 2010, 39% of male employees and 28% of female employees were in a private sector pension scheme, compared with 52% and 37% in 1997. However, participation by public sector employees remained unchanged for men over the same period, and actually increased for women.
A study undertaken by the Institute for Fiscal Studies found that pensioners – particularly pensioners who depend on state benefits – experience higher rates of inflation than non-pensioners. Rising costs for food and fuel are putting pensioners under pressure – meanwhile, an environment of low interest rates is squeezing many older people, who are more likely to be savers than borrowers.
The government has proposed a flat-rate pension of approximately £140 a week, to be paid to all pensioners; however, this has yet to be introduced and will not benefit those already in retirement. Meanwhile, according to a survey carried out by YouGov for the National Association of Pension Funds, approximately three million people aim to finance their eventual retirement with a lottery win. However, rather than gambling on your future, it is important to consider how you intend to finance your retirement as early as possible.
Please note that the above is for information only and does not constitute financial advice.
Source: Marketing Hub
