Almost two million retirees have less disposable income than an 11-year-old child
“Look after the pennies and the pounds look after themselves” is an age-old saying 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 per cent) 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 per cent) 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 per cent), entering competitions (41 per cent), and applying for free samples of food and sundries (29 per cent).
However, many current retirees will be better off than the estimated 2.3 million over-50s (27 per cent) 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.
Low levels of disposable income
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 per cent 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.
Different pension pots
For those over-50s who are within five years of retirement, 77 per cent have private pension savings. However, with people now being unlikely to stay with one employer for most of their career, 46 per cent 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 per cent) have no idea how much is saved in their pensions, and a further 60 per cent only have a fair or rough idea.
Changing retirement plans
All of this only matters of course if over-50s can leave the workplace and retire. Unfortunately, almost one third (31 per cent) 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 per cent) of working over-50s cannot pinpoint an age when they will retire, while 22 per cent 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 per cent) of over-50s not yet retired say they would continue working past state retirement age through choice, because they enjoy it.
All figures in this release are taken from the State of Retirement Report, produced by Opinium’s Desk Research unit and the survey team. The survey research was carried out with a custom sample of 1,541 British adults aged over 50 between 13–20 May 2013 by Opinium Research on behalf of LV=. Of this sample, 835 adults (54 per cent) are currently classed as ‘retired’.