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05

One in seven 2013 retirees 'will entirely rely on state pension'

Open-access content Wednesday 22nd May 2013 — updated 5.13pm, Wednesday 29th April 2020

One in seven people retiring this year will be entirely reliant on the state pension for their retirement income, with women especially dependent on the payouts, according to research published by the Prudential yesterday.

The latest data from the insurance company's Class of 2013 survey also shows that the average person planning to retire this year will rely on the state pension for more than one third (36%) of their income.

On average, women retiring this year will receive 43% of their retirement income from the state, while men will on average receive 30% of their income in this way.

Prudential's analysis also found that 18% of those planning to retire this year will be below the £8,254 a year income which the Joseph Rowntree Foundation estimates as the poverty line for a single pensioner in the UK.

Women are more likely to be in poverty in retirement, with 21% expecting to retire with an annual income below this level in 2013, compared to 14% of men. Women are also nearly three times more likely than men to have no other pension - 23% of those retiring in 2013 will do so without a private pension, compared to 8% of men.

Vince Smith-Hughes, retirement income expert at Prudential, said: '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.

'Relying 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.'

Prudential also found that nearly one-in-four (23%) of this year's retirees overestimate what the state pension pays by more than £600 a year, and 10% have no idea how much it pays.

This article appeared in our May 2013 issue of The Actuary.
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