Research released today by the insurer LV= reveals that almost 2 million retired adults in the UK have less disposable income than the average 11 year old.
LV=’s annual State of Retirement report claims that 15% of pensioners have an income of less than £154 per week, leaving just £8 after living costs are deducted. It also reveals that two thirds of retirees are resorting to money saving techniques to boost their income; 49% say they collect vouchers, with 41% regularly entering competitions and 29% applying for free samples.
This comes as low interest rates mean that many people are disappointed by the yield on their savings, and retired people are having to resort to other methods of generating income such as equity release. Georgina Smith, managing director of equity release specialists Stonehaven, claimed that this shortfall in pensioners’ income is because “annuities no longer provide the extra income that everyone expected.”
The LV= report predicts that the situation will get worse as over-50s reduce their contributions to pension funds to make up for increasing living costs. The findings show that 12% of over-50s have reduced their pension savings by an average of £191 per month in the past year, adding up to a total of £2.3 billion in “lost” retirement savings.
Ray Chinn, head of pensions at LV=, said:
“People in their 50s are saying they cannot afford to save as much as they would like to.” He went on to warn that “we are going to have a generation of pension paupers, a generation over the next decade or so who will move into retirement and be disappointed with what they have to live on.”
According to the report, one third of over-50s have had to change their expectations of retirement income in the past year, with a quarter believing they will have to continue working past the state retirement age. 3% of people over 65 say they have considered taking a second job to help support themselves.
Not only are some over-50s beginning to reduce their pension contributions, but an alarming number have no retirement savings at all. Around 2.3 million over-50s - that’s 27% - have no retirement savings, with a third of women in that age group admitting that they have no private pension.
The combination of an ageing population and ever-increasing living costs seems likely to create problems for future pensioners, unless prospects for savers improve dramatically.