Peoples ability to fund their retirement from sources other than the state pension and their workplace pension savings means only one in five can expect their income to fall by more than 20% when they stop working, an economic think-tank said today.
The Institute for Fiscal Studies' report The adequacy of wealth among those approaching retirement found that just 21% of people aged between 50 and the State Pension Age would achieve a replacement rate of 80% or worse, meaning their income would drop by 20% or more. An even smaller proportion - 10% - can expect their income to fall by at least a third.
As well as the private and state pension, households can also fund their retirement from sources such as savings, inheritances, pension credit and the return that owner-occupiers get from living in their homes.
Painting a less rosy picture for those expecting to live off their pension savings and state pension alone, the IFS said a majority (53%) would see their income fall by at least a fifth, with 41% seeing it fall by at least a third.
More than one in ten (12%) would see their income fall below Pension Credit Guarantee level - currently £142.70 a week for single people and £217.90 for couples - which would mean they become reliant on means-tested benefits for their income to relay at that level.
In general, the IFS found that single individuals were more at risk of inadequate retirement income than married individuals, with single women more at risk than men.
Having 'low' education attainment and numeracy are also linked to have having a retirement income that means a person relies on benefits. The think-tank noted, however, that while those with higher education levels tended to have a higher income in retirement, they also tended to have a higher working-life income to replace.
In separate research, the IFS also found that, on average, over-50s had seen their gross wealth - pension rights, housing wealth and wealth held in other assets - fall by 10% as a result of the financial crisis. This equals an average drop of over £60,000.
The wealthiest households were hit hardest because they tended to have more of their wealth exposed to assets that fell in price during the economic crisis. The richest fifth of over-50s saw their wealth fall by 12.9% - equal to £162,000 - compared to a 4.6% drop in gross wealth among the least wealthy fifth - equal to £9,400.
Rowena Crawford, a senior research economist at the IFS and one of the authors of the report, said: 'The decline in house prices and the stock market associated with the financial crisis depleted the wealth of the wealthy by proportionately more than that of those with less wealth.'
She added the losses occurred despite peoples' defined benefit pension rights being insulated from these changes. 'Future generations of private sector employees will be much less able to benefit from this protection and are likely to be more exposed to asset price shocks.'