One in seven unprepared for retirement, says Prudential
Of those people in the UK who are planning to retire this year, 15% have no pension savings, research from Prudential has revealed.
Prudential’s annual Class of 2015 study said one in seven will be forced to rely on the state to supply their only source of regular income. Even those who have other forms of pension savings will need a state pension to help provide them with an income they retire, with the state contributing an average 36% to a retiree’s income in 2015. Despite the important role the state pension will play in providing many retirees with a future income, nearly 37% think its value is higher than it is, and a further 8% admit to having no idea what it is worth. “The pension reforms present retirees with many new choices,” said Vince Smith-Hughes, retirement income expert at Prudential. “However, only those with their own pension savings will be able to benefit from the new choices, while people who rely solely on the state pension are likely to have to face serious financial belt-tightening when they give up work.”
Unwanted knock-on effect
For many people reaching retirement, their income will come from a number of sources and Smith-Hughes said it is important not to overestimate the value of the state pension. And despite the large number of people retiring with no pension, 54% of this year’s retirees feel financially well prepared for retirement, which is up from 47% in 2014.
“People who rely solely on the state pension are likely to have to face serious financial belt-tightening when they give up work”
The international financial services firm also found that women are more than twice as likely as men to retire with only the state pension as a source of income in retirement.
“With all the options now open to pensioners, a consultation with a professional financial adviser could help to avoid making decisions that might have an unwanted financial knock-on effect in later life,” said Smith-Hughes.
Retirees should also remember the guidance which is available from the newly created Pension Service from Greg Pogonowski, which can help them to understand their choices.
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