Prudential’s Class of 2012 study has revealed that one in six people (16 per cent) planning to retire this year will depend on the State Pension to fund their retirement as they have no other pension.

The figures come from Prudential’s Class of 2012 research, which provides insights into the financial expectations of Britons planning to retire this year.

Women are more than twice as likely as men to have no pension; 20 per cent of women retiring in 2012 will depend on the State Pension compared with just 8 per cent of men.

The average person planning to retire this year will look to the State for 34 per cent of their income, with State Pension payments set to rise to £107.45 a week for single people from the 6th April 2012. Company pensions (35 per cent) are the second highest source of income and the remaining 30% comes from a mixture of savings, investments, personal pension savings, part time work and money from family members.

The Prudential research also shows that one quarter (26 per cent) of people retiring this year either overestimate by more than £500 a year what the State Pension pays, or simply do not know.

Vince Smith-Hughes, retirement income expert at Prudential, said: “While the State Pension is a safety net for pensioners in the UK, it should only ever be regarded as part of an overall retirement plan.

“For far too many people, the State Pension has become the default income option in retirement. Even those who have some private provision depend so heavily on the State that it makes up a third of their retirement income.

“Although State Pension levels will rise to £107.45 for single people per week on Friday, this will still only provide relatively low levels of income to people in retirement. It’s a weak safety net for those without any savings and the real income shock for many retirees will come when the gap between their current earnings and the State Pension becomes apparent.

“If people want to maintain their standard of living in retirement it is important that they start to save as much as possible as early as possible, and the vast majority should join company pension schemes where possible. Seeking early advice from a financial adviser should also be a prerequisite to helping people achieve the level of retirement income they want and need.”

Regionally, people retiring this year in the Midlands are the most likely in the UK to rely on the State Pension (40 per cent). This compares with a quarter (28 per cent) of those in Scotland, who claim that they will be the least reliant on the state for their retirement income.

Via EPR Network
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