The average person planning to retire this year will rely on the state pension for more than a third of their income, new research from pension giant Prudential has revealed.
According to Prudential’s report, one in five UK pensioners will have an income of less than £8,254 a year – the amount a single person needs to be above the poverty line.
The state pension, which is worth £5,727.80 per year for a single person, will make up the great majority of retirement income for 14% – one in every seven people retiring this year.
And nearly a quarter of people retiring in 2013 overestimate how much state pension they will get – by more than £600 a year.
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Women worse off than men in retirement
The research also found that women are three times more likely than men to retire with only a state pension. This could be because they have taken time off work to care for children or relatives, meaning that they weren’t building up a workplace pension. It could also be because women are more likely to rely on their husband’s annuity income.
Women are also more likely than men to live below the poverty line. Some 21% of women will have less than £8,254 a year, compared with just 14% of men.
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Save into a workplace pension
Although the state pension will become more generous from April 2016, when the government implements the new flat-rate state pension of almost £7,500 a year (in today’s money), it should only ever make up a part of your retirement income.
Saving into a workplace pension is a simple and effective way of building up a personal pot. Vince Smith-Hughes, retirement income expert at Prudential, says: ‘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.’
More people should be getting enrolled into workplace pensions with the introduction of auto-enrolment, which started last October. It requires all employers to enrol staff into company pension schemes, although you will get the opportunity to opt out.
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