Many retiring 'below poverty line'

PensionerOne in seven people planning to retire this year has no private pension to fall back on and many will be forced to get by in poverty, an insurer has warned.

Women who are set to retire in 2013 were nearly three times more likely than men to be relying on the state as their sole form of pension income, Prudential found. Some 14% of this year's retirees said they had no company or personal pension and their only form of pension income would come from the state.
The full basic state pension is currently set at £110.15 a week, but how much someone receives depends on how many years of contributions they have made.

Almost one quarter (23%) of women will be retiring this year without a private pension, compared with just 8% of men, according to the survey. Nearly one-fifth of those planning to retire this year will be living below the poverty line, Prudential's analysis suggested.

Some 18% of people surveyed will be living on less than £8,254 a year, which is the amount estimated by the Joseph Rowntree Foundation that a single pensioner in the UK needs to live on.

The state pension will account for an estimated 43% of the average retirement income for women in 2013, while the average man retiring this year will receive 30% of his income from the state. But Prudential found that almost one quarter (23%) of people retiring this year overestimated the amount the state pension paid by more than £600 a year.

One in 10 people surveyed had "no idea" how much the state pension paid.

Vince Smith-Hughes, retirement income expert at Prudential, said: "The basic state pension alone is not nearly enough to provide a comfortable standard of living. While it's a very valuable source of additional income for millions of pensioners, the state pension should ideally only represent a part of someone's retirement income, not all of it. Relying on the state will see many people retiring below the poverty line this year, which shows the importance of building up a personal pension."

Joanne Segars, chief executive of the National Association of Pension Funds, said: "The average man or woman retiring now is expected to live into their 80s, and lifespans are increasing every year. It is worrying that around 100,000 people face the grim prospect of spending their final two decades struggling to get by on the state pension alone, and even more will be below the poverty line. Our state pension is up for some long overdue reform to make it simpler and fairer, and auto-enrolment will bring millions of people into a workplace pension. These vital changes will tackle the problem for future generations, and also help narrow the gender divide, but sadly they will come too late for this year's pensioners."

Minister for pensions Steve Webb said: "For too long women have been second class citizens in retirement. But women will be the main beneficiaries of our new flat-rate state pension introduced in 2016. In addition, millions more will start to build up a private pension because of our policy of automatic enrolment into a workplace scheme. We are protecting the income of current pensioners with a state pension that is the highest share of earnings for 20 years."

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Many retiring 'below poverty line'
Figures from charity Age UK show that 29% of those over 60 feel uncertain or negative about their current financial situation - with millions facing poverty and hardship. Even though saving for retirement is not much fun, the message is therefore that having to rely on dwindling state benefits in retirement is even less so. To avoid ending up in this situation, adviser Hargreaves Lansdown recommends saving a proportion of your salary equal to half your age at the time of starting a pension. In other words, if you are 30 when you start a pension, you should put in 15% throughout your working life. If you start at 24, saving 12% of your salary a year should produce a similar return.
Many older couples rely on the pension income of one person - often the man. Should that person die first, the other person can therefore be left in a difficult position financially.
One way to prevent financial hardship for the surviving person is to take out a joint life annuity that will continue to pay out up to 67% of the original payments to the surviving partner should one of them die.

The disadvantage of this approach, however, is that the rate you receive will be lower. Again, the Pensions Advisory Service on 0845 601 2923 is a useful first port of call if you are unsure what to do.

Around 427,000 households in the over-70 age groups are either three months behind with a debt repayment or subject to some form of debt action such as insolvency, according to the Consumer Credit Counselling Service (CCCS).

Its figures also show that those aged 60 or older who came to the CCCS for help last year owed an average of £22,330. Whether you are retired or not, the best way to tackle debt problems is head on.

Free counselling services from the likes of CCCS and Citizens Advice can help with budgeting and dealing with creditors.

Importantly, they can also conduct a welfare benefits check to make sure you are receiving the pension credit, housing and council tax benefits, attendance and disability living allowances you are entitled to.


The average UK pensioner household faces a £111,400 tax bill in retirement as increasing longevity means pensioners are living on average up to 19 years past the age of 65, according to figures from MetLife. And every year in retirement adds an extra £5,864 in direct and indirect taxes based on current tax rates to the costs for the average pensioner household. You can be forced to go bankrupt if you fail to pay your taxes, so it is vital to factor these costs into your retirement planning.It is also important to check that you are receiving all the benefits and tax breaks you are entitled to if you want to make the most of your retirement cash.

The cost of a room in a care home in many parts of the country is now over £30,000 a year, according to figures from Prestige Nursing and Care. So even if the prime minister announces a cap on care costs - last year the economist Andrew Dilnot called for a new system of funding which would mean that no one would pay more than £35,000 for lifetime care - families will still face huge accommodation costs. Ways to cut this cost include opting for home care rather than a care home. Jonathan Bruce, managing director of Prestige Nursing and Care, said: "For older people who may need care in the shorter term, home care is an option which allows people to maintain their independence for longer while living in their own home and should be included in the cap." However, the only other answer is to save more while you can.
Older Britons are often targeted by unscrupulous criminals - especially if they have a bit of money put away. For example, many over 50s were victims of the so-called courier scam that tricked into keying their pin numbers into their phones and handing their cards to "couriers" who visited their homes. It parted consumers from £1.5 million in under two years. Detective Chief Inspector Paul Barnard, head of the bank sponsored dedicated cheque and plastic crime unit (DCPCU), said: "Many of us feel confident that we can spot fraudsters, but this type of crime can be sophisticated and could happen to anyone." The same is true of boiler room scams that target wealthier Britons with money to invest, offering "once-in-a-lifetime" opportunities to snap up shares at bargain prices. Tactics to watch out for include cold calling, putting you under pressure to pay up or lose the opportunity for good, and claiming to have insider information that they are prepared to share with you.

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