An interesting report was published at the end of last week by LV=, which reveals that although last week’s Budget announcement gives new retirees more choice about how they take their pension, they can still expect to see their income drop by two thirds (66%) when they leave the workplace.
The report also reveals that while the average annual salary for the over 60s is £25,480, the average annual pension income, including state pension, is just a third of that at £8,774.This means that the average Brit retires with an annual income almost 24% less that of the minimum wage. The changes that are coming into effect will mean that the average retiree drawing their entire pension in one go will have to closely budget to ensure it lasts their lifetime, according to LV=.
The findings indicate that the gender pay divide that women experience in the workplace continues into retirement. The research suggests that women will have to survive on an annual income that is up to 40% less than the average man’s retirement income, with women receiving £6,580 and men receiving £10,967 a year. This equates to a weekly income of £126 and £211, respectively, and an income drop of 68% for women compared to 60% for men.
Of those women within five years of retiring, the report says that a fifth (19%) of women do not have any private pension savings at all and will rely solely on the state pension. Only 12% of men, on the other hand, will find themselves in a similar predicament. This lack of private pension savings means this group will see their income fall by 78% as they potentially have to live on a ‘pension wage’ of just £110 a week.
The challenge of funding a post-work life on a small pension has clearly been realised by those nearly at retirement with a third (30%) of working Brits aged between 60-69 years changing their retirement plans in the last twelve months. The vast majority of these (85%) say they now expect to retire later than they had planned.
The findings indicate that working Brits are choosing to delay their retirement rather than put more money away. Over the last twelve months, one in ten (10%) have actually decreased the amount they are putting away for retirement by an average of £50 a month, or £600 a year.
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