- Almost two million retirees have less disposable income than an 11-year-old child
- 2.3 million over-50s heading for a similar fate with nothing saved for retirement
- £2.3 billion "lost" in retirement savings in the last year as many over-50s reduce contributions
"Look after the pennies and the pounds look after themselves" is an age-old adage dispensed to children as they learn the basics of money. However, adults may want to take heed of their own wise words before they reach retirement, as almost two million retirees currently have less disposable income than a child.
The annual State Of Retirement Report from retirement specialist LV=, shows 1.9 million (15%) retired Britons currently bring in a combined state and private pension income of £154 or less per week. After deducting average weekly essential living costs of £146.90, these retirees are left with less cash in their hands than an 11-year-old child, who currently on average enjoy a weekly pocket money allowance of almost £8.
Nearly two thirds (61%) of all retirees surveyed by LV= admitted their financial situation is so spartan they resort to a repertoire of money saving techniques to make ends meet. This includes collecting food vouchers to boost the weekly budget (49%), entering competitions (41%), and applying for free samples of food and sundries (29%).
However, many current retirees will be better off than the estimated 2.3 million over-50s (27%) heading towards retirement with nothing saved and only the basic state pension to rely on. Even with the introduction of a new higher flat rate pension of £144 per week in 2016, millions of men and women may have no disposable income to speak of and will struggle to cover just their basic weekly living costs. This lack of savings is despite this group saying on average they wouldn't be able to live on less than £214 per week in pure discretionary income, when they retire.
Savings slashed
According to the LV= report, even those who are saving for retirement could leave themselves with low levels of disposable income due to drastically cutting their contributions. In the last 12 months, £2.3 billion has been ‘lost' in retirement savings, with 12% of over-50s not yet retired having cutback their long-term savings, by an average of £191.36 per month, or £2,296 per year.
Ray Chinn, LV= Head Of Pensions, said: "It's truly worrying that decades after leaving their childhoods, millions of retired adults now find themselves back in a situation where their weekly spending power amounts to what is essentially pocket money.
"Perhaps even more concerning is the next generation of retirees being in such a precarious financial position that many will struggle to cover the cost of their essential weekly expenses, let alone having anything left to enjoy their retirement with. Putting away enough for a comfortable life after work is not easy, but we would urge people to plan ahead in order avoid a future where they might be less wealthy than an 11-year-old. Even for today's over-50s rapidly approaching retirement, it's never too late to make a difference."
Pension confusion
For those over-50 who are within five years of retirement, 77% have private pension savings. However, with people now being unlikely to stay with one employer for most of their career, 46% of this group have their savings split between two or more different pension pots. At a point when they should be in their final stages of retirement planning a fifth (19%) have no idea how much is saved in their pensions, and a further 60% only have a fair or rough idea.
Working late
All of this only matters of course if over-50s can leave the workplace and retire. Unfortunately, almost one third (31%) admitted that financial pressures have forced them to change their retirement plans in the last 12 months, and now expect to retire later in life. Over a quarter (28%) of working over-50s cannot pinpoint an age when they will retire, while 22% have accepted they will work past state retirement age through necessity.
However, it isn't all doom and gloom, as more than a quarter (27%) of over-50s not yet retired say they would continue working past state retirement age through choice, because they enjoy it.
Ray Chinn concluded: "In the face of rising living costs and numerous other financial pressures, many over-50s are making cutbacks to their retirement savings, in order to maintain their lifestyles in the here and now. But there are other options."
"Our research shows that 70% of over-50s have never sought any advice on retirement planning. Choices in retirement have grown considerably in recent years. By seeking professional counsel and understanding all of the ways and means of maximising savings and retirement income, people can come to a situation where they may not need to make such deep cuts, and can put themselves on the path to a retirement where they have both the buying power and quality of life they desire."
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