More than one in seven workers are approaching retirement without a workplace or personal pension.
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Around 6% will leave work this year with a potential income that is less than the minimum level set by the government for a single pensioner, claims a new report.
Retired couples relying on the State pension as their only income will live just below the poverty line, says new research by financial firm The Prudential.
Average pension pots are so modest that the State pension will comprise around 36% of a retired couple’s income.
The gender gap still means women are twice as likely to have the State pension as their only income, while 15% of all retirees this year will have no other income other than that provided by the State.
Half have no idea about worth of State pension
The figures come from The Pru’s annual look at pension income in the UK.
The retirement income levels come from research by think-tank the Joseph Rowntree Foundation, which sets an adequate income at £9,500 a year for pensioners.
A worker relying on the State pension will have a weekly income of £115.95, which equates to £6,029 a year. A retired couple will receive £231.90 a week from the State, which is £12,058 a year.
The poverty line is set by the government at £224 a week or £11,648 a year.
The report explains that the State pension is an important part of retirement income, but many are not sure how much they will receive.
Nearly 40% have overestimated how much they will be paid, while 8% have no idea of how much they will receive.
Pension freedom’s OK if you have savings
Vince Smith-Hughes, retirement income expert at Prudential, said: “Pension freedoms are all well and good for those with enough money in their pensions to make choices about how they want to spend their savings.
“The problem is many who are giving up work to receive just the State pension will experience a massive drop in income and will have to tighten their household budgets to get by on much less money than they are used to.”
Although the study shows 54% of those retiring in 2015 are generally happy with their income, women (46%) are less confident that they have enough pension income than men (59%).
“The State pension is a significant part of most pensioner incomes,” said Smith-Hughes. “It’s important that everyone takes financial advice to make sure they make the most of the income they have and realise what they have to do to enjoy their retirement.”
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