More than six million of the UKs over 50s will live on less than the minimum wage in retirement, a new survey has found.
According to the State of Retirement Report from LV=, the number of people who rely on the state pension solely for an income in retirement - currently 1.2 million - is set to jump to around 6.25 million, because of a failure to save enough through their working lives.
The average basic state pension currently equates to around £5,587; an average of £9,672 a year if the additional state pension is claimed. This is less than half of the earnings of a UK full time worker earning the minimum wage who receives £11,477 a year.
Even those combining private pension savings of an average £7,488 a year with the state pension will be expecting to live on less than the minimum wage. Government plans to introduce a universal state pension of around £140 a week will also not be enough to push retirees over a minimum wage standard of living.
When questioned about their retirement income, 43 per cent of respondents said they could not live on the equivalent of the minimum wage in retirement, while over a quarter (27 per cent) said they would struggle.
Yet despite these attitudes, 15 per cent of those who have already retired, or are set to within the next five years, have cut back on pension contributions, with an average decrease of £296 a month, or £3,552 a year. This equates to £8.31 billion in lost savings in the last year.
Describing the cut back as 'worrying', LV= head of pensions Ray Chinn, said: "While working hard up to retirement to bring home a decent wage, I'm sure many will be disappointed to retire with an income equivalent of less than the minimum wage. If more people reflected on their pension as a "wage" that they will potentially be relying on for over two decades, they might feel more inclined to plan ahead."
In a separate survey by Prudential, only 20 per cent of retirees have set aside money for potential care needs.
With the Government planning a number of changes which will impact on retirees, including the freeze in age related allowances and a rise in the state retirement age, Ray Chinn said that changes were a 'necessary evil' given the rise in life expectancy, high inflation and low interest rates.
"Ensuring clear communication around these issues is key, otherwise there is a risk that people will be further alienated from the critical need to plan for retirement," he added.
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