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One in seven retirees to rely on state pension for income in 2013

The Momentum UK Team 22 May 2013

One in seven (14%) of those retiring in 2013 will rely solely on the state pension to provide them with an income because they have no other provisions in place according to a new report from Prudential.

According to the report the State pension now accounts for 36% of the average retirement income, with women more likely than their male counterparts to retire with only a state pension.

Meanwhile 23% of those retiring in 2013 overestimate the amount that a state pension will pay out by over £600 while one in ten have no idea how much they can expect.

Vince Smith-Hughes, from Prudential, said:

"Against a backdrop of rising living costs, the basic State Pension alone is not nearly enough to provide a comfortable standard of living. While it's a very valuable source of additional income for millions of pensioners, the State Pension should ideally only represent a part of someone's retirement income, not all of it.

The Joseph Rowntree Foundation estimates that the poverty line for a single UK pensioner sits at £8,254 in income each year, but the Prudential report says that 18% of those retiring in 2013 expect to retire on less.

Smith-Hughes said:

"Relying on the State will see many people retiring below the poverty line this year, which shows the importance of building up a personal pension. Virtually everyone with the option of a company pension should take advantage of that, and the tax relief and employer contributions that go with it.

“When combined these often come to more than double the amount of pension contribution the employee has to make.”

Gender divide

The report highlights a significant divide between the genders when it comes to facing poverty in retirement with 21% of women likely to fall below the poverty line compared to just 14% of men.

Women are also three times more likely than men to rely solely on the state pension to provide them with an income.

For women retiring in 2013 the state pension will make up, on average, 43% of their retirement income, compare to 30% on average for men.

Smith-Hughes said:

"If people want to enjoy a comfortable retirement, saving as much as possible as early as possible is important, while seeking advice from a financial adviser or retirement specialist can also help to make the most of retirement income."

Momentum