One in seven people are retiring with no pension

Retiring with no pension

Almost one in seven people retiring this year have saved nothing towards a pension, and 11% say they'll need to rely on their State Pension. It means they'll have to get by on £1,400 a year less than the minimum required to make ends meet - and things are even worse for women.

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The findings emerged from a study by Prudential, which found that women were far less likely than men to have saved for retirement - and almost one in five will retire with no pension of their own

The State Pension was never designed for a comfortable retirement on its own. It falls £1,400 a year below Joseph Rowntree Foundation's Minimum Income Standard for a single pensioner.

The only silver lining is that the number of women making no provision for themselves is dropping, and that the 19% with no savings is lower than the 22% last year.

The more positive news is that overall, the State Pension accounts for roughly a third of most pensioner incomes. This seems to indicate that most people who are on the verge of retirement have taken some sensible steps to save for the future.

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The future

While this is great news for most of today's pensioners, it's worth taking a second to consider the implications for the future. Of those who are retiring this year with a pension of their own, 42% of people say the majority of their savings are in a workplace final salary pension. Over the next decade, we can expect to see this figure drop dramatically, as the death of final salary pensions makes its presence felt among retirees.

In their place, workplace schemes now tend to be far less generous defined contribution schemes. This year, workplace DC schemes account for 13% of pensions, but over time, we can expect more and more workplace pensions to be DC. Given that the vast majority of DC schemes are far less generous than DB schemes, the impact of this will be a dramatic drop in pensioner incomes.

At the moment most open workplace pensions are DC schemes, offered through automatic enrolment, offering the minimum possible employer contributions under the legislation. The experts agree this is a drop in the ocean compared to what people will actually need to retire on, so unless people start to save more, we can expect state pensions to make up a much larger percentage of retirement incomes.

Likewise, 13% of people retiring this year say most of their pension income comes from personal pensions. As an increasing proportion of the workforce moves into the gig economy, and works on a freelance basis, we will either see this figure rise, or we will see the numbers with no pension savings at all shoot up.

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What can you do?

The figures go to show how vital the State Pension is to the majority of people, and how important it is to ensure you are entitled to as much of the full State Pension as possible. Stan Russell, retirement income expert at Prudential, said: "The State Pension is a vitally important component of pensioners' incomes – especially as the 'triple lock' ensures that it increases in value every year. People throughout their working lives should be doing everything they can to ensure that they are entitled to the full amount of State Pension, including making voluntary National Insurance contributions to cover any missing years."

It also shows how essential it is for the next generation to take charge of their own retirement savings. The death of final salary pensions, and the paucity of most DC schemes, means the only chance the next generation has of a decent retirement income is to put aside whatever they can afford for the future.

As Russell says: "While saving is not always easy, especially when the multitude of costs in everyday life get in the way, it is important to try to save as much as you can from as early as you can, to help to avoid financial struggles during retirement."

How we spend our pensions
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How we spend our pensions

Figures from Saga show that the over 50s now account for the majority of money spent by Brits on travel and tourism. They have the time to spare, the money, and they are healthy enough to take on the world.

A poll from Abta found that in the wake of pension freedoms, 35% of people were considering cashing in at least part of their pension to travel. A separate study by Senior Railcard found that pensioners take an average of three holidays a year, plus two weekends away, and 17 day trips.

Research from Senior Railcard found that retirees eat out an average of three times a month. However, one in ten do so more than twice a week, and one in three people said that one of the first things they did when they retired was to go out for lunch with their friends.

Of course, just because retirees want to enjoy themselves, it doesn't mean they are happy to throw money away. The vast majority are keen to eat at lunchtimes, when a fixed lunch menu tends to be cheaper, and canny retirees are skilled at tracking down pensioner special offers too.

Figures from the Office for National Statistics show that on average nearly a fifth of the money spent by people aged 65-74 is on leisure. This includes everything from the cinema and theatre to golfing and gardening. They spent more on this than on food, energy bills and transport.

A report by Canada Life found that retirees are spending £4,279 a year on having fun - that’s more than £1,000 more than they spend on boring essentials, and is a 74% increase over the past ten years. It went on to predict that this trend was set to continue, and that pension freedoms would encourage people to spoil themselves a bit more in retirement

Pensioner property wealth is now over £850 billion, and all these family homes don’t look after themselves. The Senior Railcard survey put home renovations in the top 20 activities people got stuck into on retirement, and figures from ABTA found that almost a third of people who were considering raiding their pension pots under the new pension freedoms planned to spend the cash on their home. This seems like an eminently sensible investment - looking after what is undoubtedly their most valuable asset.

Unsurprisingly, while some pensioners are very well off indeed, others are struggling with debt. Figures from Key Retirement found that the average retiree has £34,000 of debt.

Most of this is mortgage borrowing - in many cases driven up by the number of people who unwittingly signed up to an interest-only mortgage. However, credit cards, overdrafts, and loans are also common. It’s why so many pensioners have used pension freedoms to access enough cash to pay their debts.

The day to day basics are swallowing up their fair share of pensioner cash too. On average, people aged 65-74 spend a third of their weekly income on essentials like food and bills - which is hardly living the high life.
The bank of gran and grandad has become an increasingly vital source of cash for families. According to Key Retirement, of those who release equity from their property, 21% of them use the cash to treat their children and grandchildren. This includes an average of £33,350 to help children get onto the property ladder, £6,000 to buy them a new car, £11,000 on family weddings, and £24,780 giving grandchildren a helping hand.

While retirees are quite rightly spending what they need to enjoy retirement, they are hardly all throwing caution to the wind, buying flash cars and spending the kids' inheritance.

Most expect to have something left over to pass onto their family after their death. Some 69% expect to leave property in their wills, and 75% expect to leave cash - according to - because while baby boomers know how to have fun - they also know how to save for the future.


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