A British retiree's annual income is less than that earned by a graduate in their first job, according to research carried out by Skipton Financial Services.
Incredibly, the average retired person brings home just £15,776.27 a year - which is nearly six thousand pounds less than a 21-year-old fresh out of University.
Researchers found that, despite working for up to fifty years, those people entering the ‘golden years' are struggling to make ends meet on a wage they previously earned up to 25 years ago. The staggering findings emerged in a study of adults who have left employment for good, and are now trying to get by on a lower income at a time when the cost of living is going up and up.
It shows one in six people are relying solely on their state pension to survive financially - which means they bring home a maximum of £145.40 a week, or £7,560.80 per year, once guarantee credit is added to top up the basic weekly state pension of £110.15.
According to the report, seven in 10 people in retirement found it easier to cope 25 years ago on the equivalent of what they are earning now, simply because the cost of living was so much lower. And while 45% of elderly people have a private pension and a further 56% have a company pension, a third admits they find it hard to see it through to the end of the month.
Indeed, 26% currently find it hard to manage their bills and the rest of their outgoings, with the same percentage having less than £100 of disposable income to live on for the whole month. Just under half of retirees say the rise in the cost of petrol, food and utility bills has made it hard for them financially, while 33% spend most days worrying about money and how they are going to survive.
A third of those polled deeply regret not preparing for retirement earlier - and on reflection wish they had taken action by the age of 30. Three in 10 people didn't save a penny towards their retirement years and 45 per cent assumed they would be able to fall back on the state pension, without needing to make other provisions - probably not realising how low an income this really is.
Andrew Barker, managing director of Skipton Financial Services, said: "It is extremely worrying that so many people are facing such a struggle in retirement, at a time when they would have hoped to be able to enjoy themselves and do some of the things they were unable to do whilst working. It is also troubling that a sixth of people surveyed are relying solely on their state pension, as it may be many have underestimated their expenditure in retirement and overestimated their disposable income. It will be a culture shock for some people to only have the same income they had a quarter of a century ago, especially when you factor in the effects of inflation. The squeeze on their finances will not be helped by the recent announcement by the Bank of England governor Mark Carney that interest rates are likely to remain at their record low 0.5% for at least the next three years, meaning a prolonged inability to rely on an inflation beating rate of return on their hard earned savings.
"It is concerning that a third of people are finding it hard to make it through the month, with over a quarter having less than £100 of disposable income to last the month. It is worrying that almost half assumed they would be able to rely on their state pension and almost a third saved nothing towards retirement. 15% prepared for retirement but their savings have already gone, with the average time their retirement savings lasting only 14 years. People underestimate what they would need to or want to spend, as it is unusual for retirees to change the lifestyle they have become accustomed to.
"Half of respondents admit that the recent rises in inflation have hit them hard and they are in for further pain with the comments from Bank of England Governor Mark Carney that he expects inflation to remain above the 2 per cent target at around its current level in the near term, not dropping to below 2.4 per cent until the end of next year. It is sadly too late for the third who admit that they
regret not preparing for retirement earlier and these will probably be the same third who spend most days worrying about money, when they should be enjoying years of freedom and good health.
"Legislation earlier this year announced that the state retirement age will increase to 67 between 2026 and 2028, followed by future increases linked to life expectancy, which is likely to see young workers today not retiring until they are into their 70s. This will at least mean these people have more time to financially prepare for their retirement, as well as a shorter retirement to fund. One thing which will hopefully help future generations of retirees is auto-enrolment, meaning less people will have to rely solely on their state pension. The key thing is to start putting money aside as soon as you can after starting employment, as often people could have more disposable income when young, before they get onto the property ladder and have children to support.
"Many people never tie their retirement aspirations up with their financial arrangements, and as such rarely think about what it will take to fulfil those goals. Yet for a lot of people, the future will soon be the present and it could be filled with regrets from knowing that it could have been different, had they made more of their finances when they had the opportunity."
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