New retirees see income drop by two thirds

British retirees will see their income drop by two thirds (66%) when they leave the workplace, according to the annual ‘State of Retirement’ report from retirement specialist LV=

New retirees see income drop by two thirds

The report 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 the average Brit retires with an annual income almost 24% less than the minimum wage.

LV= says the scrapping of compulsory annuity purchase will mean the average retiree drawing their entire pension in one go will have to closely budget to ensure it lasts their lifetime.

The research suggests 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 within five years of retiring, 19% of women do not have any private pension savings at all and will rely solely on the state pension, compared to 12% of men. The 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 vast majority (85%) say they now expect to retire later than they had planned.

Looking at those aged 50-59, a fifth believe that they will have to work past the state retirement age due to financial reasons.

The findings indicate that, rather than put more money away, working Brits are choosing to delay their retirement. Over the last twelve months, one in ten have actually decreased the amount they are putting away for retirement by an average of £50 a month, or £600 a year. This equates to £535 million lost in retirement savings.

Traditionally by the time someone reaches retirement they would have paid their mortgage off and have fewer financial commitments than when they were working.

However, more than one in ten retirees have credit card debts, while 7% have an outstanding mortgage and one in 20 are overdrawn.

LV= says this may go some way to explain why, of those working and within five years of retirement, 58% expect their regular outgoings to rise or stay the same when they leave the workplace.

“Brits approaching retirement are under huge financial pressure, as their retirement savings are being stretched over a much longer period of time than before, said Richard Rowney, life and pensions managing director at LV=.

“It’s clear that today’s retirees leave work with far more financial commitments to contend with than previous generations meaning their money has to go further for longer.

“Given that the age at which you stop earning a wage can have a significant impact on how much you have to fund your post work lifestyle, it is not surprising that many are choosing to delay retiring.”

Enter your e-mail address to receive updates straight to your inbox

My Newsletter

You can easily unsubscribe at any time by clicking on the unsubscribe links at the bottom of each of our emails
Categories: News

About Author