Average retired household 'receives 48% of income from benefits'

Retired households typically get nearly half of their income from benefits, highlighting the need for people to think about putting away more for their later years, according to a study.

The average retired household receives around 48% of its income from benefits, equating to around £10,800, with the state pension making up the biggest chunk, with an average £8,750 contribution per household, analysis of official figures by MetLife found.

By contrast, investment income accounted for 6% of household retirement income at around £1,420 a year per household.

Private pension income was found to account for around 42% of household income.

MetLife argues that the findings underline the need for people to have certainty over their retirement income.

It said that for the wealthiest retired households with incomes in the top 10% bracket, benefits were worth around 21% of household income.

For the least well-off households in the bottom 10% income bracket, benefits made up around 79% of their income.

Dominic Grinstead, managing director of MetLife UK, said: "The State Pension is a good safety net and other benefits will help maintain a basic standard of living for retired households.

"The reforms due next year with the flat rate single tier pension could provide further help but it is clear that people who run out of money in retirement will face major cuts in their standard of living."

He said that having certainty over retirement income was "more important now than ever", following reforms introduced in April giving people aged 55 and over more freedom about how they used their pension pot, rather than being required to buy a guaranteed income called an annuity.

Here are MetLife's tips for saving for later life:

:: Savers who are close to state pension age can get an estimate of how much their state pension will be worth when they retire. Contact the Future Pension Centre Helpline at www.gov.uk/future-pension-centre or 0345 3000 168.

:: Younger savers should join their company pension scheme. Employers are gradually being brought into workplace pension reforms which mean they will automatically place staff into a workplace pension.

:: All savers should keep a regular check on how much they have in retirement savings - and those who are close to retirement should start planning their budget.

:: Savers should save as much as possible and as early as possible for their retirement - pension saving offers generous tax breaks and Isas also offer tax-efficient saving.

:: People can consider getting independent financial advice - www.unbiased.co.uk can give names of local advisers.

:: Be wary of pension scammers, if something sounds too good to be true it probably is. The Money Advice Service - www.moneyadviceservice.org.uk can offer tips on what to watch for.