Failing to save enough money for retirement is dragging one in ten high earners near to poverty when they decide to stop working.
The financial gap between working and retirement is a shocking drop for many who no longer have a pay check coming in.
These retirees are living on the breadline – with just £293 a week coming in for couples and £197 a week for singles – according to the study for AgeUK.
Before they gave up work, these high-earners were enjoying incomes of more than £481 a week.
And almost overnight, couples have to cope with losing £188 a week or £9,776 a year.
High earners worse off
These high earners are worse off than low earners because the state pension more or less replaces their weekly incomes and the smaller shortfall is easier to make up from part time work or a smaller savings pot.
On average, explains the report, some who retires generally expects pension income of around two-thirds of their former earnings. The state pension contributes about 50% of this amount.
But as companies switch from guaranteed final pensions to defined contribution schemes based on stock market performance, many workers will receive much less than they would expect under the old pension regime.
AgeUK reveals almost 2 million pensioners have an annual income between £8,944 and £13,312 a year.
The planned flat rate state pension is expected to start from April 2016 and will pay out around £155 a week when cost of living rises between now and then are taken into account. This will slightly improve the situation for many, but retirees receiving extra from the second state pension will lose out because the scheme will be abolished.
Interest rates stay at record low
Tom Wright, group chief executive of Age UK, said: “Too many people are ignoring the consequences of failing to save enough to fund a comfortable retirement and are exposing themselves to difficult financial circumstances.
“Not only are people not saving enough, they are living longer, which means they need even more money in retirement. It’s important savers and the government move on this now, especially as years of low interest rates have not helped retirement savers.”
The Bank of England monetary policy committee has agreed to peg interest rates at 0.5% again in February – and if the figure remains the same at the next meeting in March, the rate will have remained unchanged for a record five years.