Are you financially prepared for your retirement?

The State Pension accounts for 36 per cent of the average retirement income in 2013

One in seven (14 per cent) people planning to retire this year will depend on the State Pension as they have no other pension, according to new research from Prudential.

The poverty line
The insurer’s Class of 2013 research, the latest of the annual studies conducted by Prudential since 2008, tracks the financial plans and expectations of people entering retirement this year. The study reveals that the average person planning to retire this year will rely on the State Pension for more than a third (36 per cent) of their income.

Analysis by Prudential also reveals that nearly one in five (18 per cent) of those planning to retire this year will be below the poverty line. The Joseph Rowntree Foundation estimates that to be above the poverty line a single pensioner in the UK needs an income of at least £8,254 a year, yet 18 per cent of those retiring in 2013 expect to retire on less than this.

Significant gender divide
The findings also highlight a significant gender divide, with 21 per cent of women expected to retire below the poverty line in 2013 compared with 14 per cent of men. In addition, women are nearly three times more likely than men to have no other pension – 23 per cent of women retiring in 2013 will retire without a private pension, compared with just 8 per cent of men.
The State Pension accounts for 43 per cent of average retirement income for women in 2013, while the average man retiring this year will receive 30 per cent of his income from the State.

Relying on the State
Prudential’s research shows that nearly a quarter (23 per cent) of people retiring this year overestimate what the State Pension pays by more than £600 a year, and 10 per cent have no idea how much it pays.

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.

elying 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.