Although the Office for National Statistics (ONS) has revealed that the number of people at retirement age in the UK who now receive a private pension income has almost doubled, The People’s Pension (TPP) has reported that retiring fully and relying solely on a pension is no longer an option for the majority.
Whilst almost 80% of retirees received a private pension last year, 52% of 4,000 expectant retirees polled believe that their financial situation will not support the lifestyle they would want in retirement. To supplement their pensions, 39% said they would have to continue to work on a part time basis, with 24% stating they will rely on inherited wealth.
Darren Philp, who is Director of Policy and Market Engagement for The People’s Pension stated:
“This research confirms that the concept of a “carriage clock” retirement, whereby people completely stop work and rely on their pension savings is consigned to history. Instead, people appear to be planning for a phased retirement, where they may choose to work part-time, or surviving on uncertain funding sources such as an inheritance or property. Most worryingly, these “precarious pensioners” are not solely the generations of the future but include those over 55, many of whom may be unprepared financially for imminent retirement.”
Even though state pension income has almost doubled in the last 40 years, the ONS disclosed that over half of the increase in gross income for average retirees is a result of an increase in income from private pensions. Retired households with private pensions had 60% more income than those relying on a state pension.
At the end of 2016, whilst the average income for a retired household was less than the average income for a non-retired household, data does however show that it has grown at a faster rate than the average non-retired household over the last 40 years.
Steve Webb, Director of Policy at Royal London said:
"In previous generations being elderly was a by-word for being poor. That has changed dramatically in the last 40 years with pensioner incomes nearly trebling whilst the incomes of the working age population rose much more slowly.”
Experts believe that while automatic enrollment will go a long way to improving retirement outcomes in the UK, the minimum contributions still won’t be sufficient. Workers will need to build up their pensions from the earliest possible age and at a faster rate than at present.
