Too many people will rely on the state pension in the UK and believe it is more than it actually is, research shows

News - Living

Written by Ray Clancy

Wednesday, 27 January 2010 09:15

There is an over reliance on the state in the UK as research shows that one in five planning to retire in 2010 have no pension.

The state pension is set to make up 34% of income for those planning to retire this year but a third of people don’t even know how much it is or think it is more than it actually is, according to research published today (Wednesday January 27) by the Prudential.

Prudential is warning that the basic State Pension, paying just under £5,000 a year, on its own may not provide sufficient retirement income for many and urges people who are still working to save as much as possible for their old age in company and personal pensions as well as savings and investments.

‘Given that so many people expect to retire on the basic State Pension, particularly when only half know how much it pays, there is still a clear need for people to understand the consequences of not making adequate provision for their retirement,’ said Martyn Bogira, Director of Defined Contribution Solutions at Prudential.

‘If the basic State Pension is your only source of income you could be in an extremely precarious position financially. Just one significant financial emergency, like your central heating system unexpectedly breaking down, could cause serious financial hardship for people expecting to retire on the State Pension alone,’ he added.

Average expenditure in households headed by someone aged 65 to 74 was £321 a week, according to the most recent Office for National Statistics figures, and £218 a week for households headed by someone aged 75 or over. But today the basic State Pension for married couples lags behind this figure, paying £152.30 a week.

Prudential’s research shows one in four people, 29%, of those planning to retire in 2010 estimate the State Pension pays £90 a week and one in five, 21%, think it is £100 a week, when the actual maximum amount for an individual is £95.25 a week.

Another 24% believe the State Pension pays between £110 and £175 a week and 7% simply said they didn’t know how much it pays.

It also found that the State Pension will, on average, account for just over 34% of income in retirement for those people who say they plan to retire in 2010. Income from company pension schemes is at 36%, other savings and investments 11%, personal pensions 9%, part time employment some 6%, income from property 2% and capital or equity from a home 1%.