Prudential has warned too many people nearing retirement have not saved any money into a pension and will be overly reliant on the state pension for income.
Nearly one in seven people retiring this year have not prepared for their retirement, and 11 per cent will be either totally or somewhat reliant on the state pension when they stop work, according to Prudential’s tenth annual retirement report.
This was the finding of an online survey conducted for Prudential between 8 and 22 November 2016 among 10,605 UK non-retired UK adults, including 1,000 intending to retire in 2017.
Prudential calculated those relying on the state pension for income will receive up to £1,400 per year less than the Joseph Rowntree Foundation’s minimum income standard for a single pensioner of £186.77 per week, the benchmark income required to support an acceptable standard of living in retirement.
A pensioner retiring after 6 April this year would have a weekly income of £159.55 under the new flat rate state pension, amounting to an annual income of £8,300.
Stan Russell, retirement income expert at Prudential, called the state pension a “vitally important component” of pensioners’ income but that it should be viewed as just one aspect of retirement planning.
“While saving is not always easy, especially when the multitude of costs in everyday life get in the way, it is important to try to save as much as you can from as early as you can, to help to avoid financial struggles during retirement,” Mr Russell said.
Women planning to retire this year have begun to close the gap with men on retirement income expectations but continue to fall behind in pension contributions as 19 per cent of women are set to retire without a pension compared to 9 per cent of men.
Claire Walsh, chartered financial planner at Aspect 8, said the lack of pension savings among women was not surprising and was a reflection of a wider gender divide.
She said: “Women earn less, take time out to have children and while the gap has closed in recent decades this will be even more pronounced for women retiring now who entered the workplace in the 1970s.”
Ms Walsh added women tend to be more cautious before investing than men and feel they need a thorough grasp on investments instead of putting their money in something they do not fully understand.
“Even where women do have equal earnings to men I tend to find that women are more circumspect about finances, whilst men engage more readily with investments and pensions my perception is that women feel that they really want to understand everything in detail and this is a barrier to them engaging with pensions and investments and they are consequently more likely to keep their wealth in cash,” Ms Walsh said.
julia.faurschou@ft.com
