Prudential Warns Of Widespread Over-Reliance On State Pension
on: January 21, 2010, 4:57 am
According to new research* from Prudential, nearly a fifth
(18%) of people planning to retire in 2010 will be retiring on the
State Pension and savings.
But 31% of the people surveyed in Prudential’s nationwide Class of 2010 study either
do not know how much the basic State Pension pays or over-estimate the individual
weekly amount by £25 or more.
Prudential warns the basic State Pension
alone may not provide sufficient retirement income
for many and urges people who are still working to save as much as possible for
their old age in company and personal pensions as well as savings and investments.
"Given that so many people expect to retire on the basic
State Pension, particularly when only half know how much it pays, there is still a
clear need for people to understand the consequences of not making adequate
provision for their retirement," said Martyn Bogira, Director of Defined
Contribution Solutions at Prudential.
"If the basic State Pension is your only source of income you could be in an
extremely precarious position financially. Just one significant financial
emergency, like your central heating system unexpectedly breaking down, could cause
serious financial hardship for people expecting to retire on the State Pension
"On its own the basic State Pension, paying just under £5,000 a year**, should only
really be used to supplement other sources, such as income from a pension or an annuity.
"We would urge people to pay as much as they possibly can into their retirement
savings, because the State alone is unlikely to be able to support you in your
retirement. The sooner you start saving, either into a company pension, personal
pension or other savings, the greater the amount of money you can build up to help
provide for you when you do come to retire."
Average expenditure in households headed by someone aged 65 to 74 was £321 a week,
according to the most recent Office for National Statistics figures from 2007***,
and £218 a week for households headed by someone aged 75 or over, but today the
basic State Pension for married couples lags behind this figure by paying £152.30 a
Prudential’s research shows just 29% of those planning to retire in 2010 estimate
the State Pension pays £90 a week and 21% estimate £100 a week – the actual maximum
amount for an individual is £95.25 a week**. Another one in four of people (24%)
believe the State Pension pays between £110 and £175 a week while 7% simply said
they didn’t know how much it pays.
The Prudential survey found that the State Pension will, on average, account for
just over 34% of income in retirement for those people who say they plan to retire
in 2010. Other sources include:
- Company pension: 36%
- Other savings and investments: 11%
- Personal pension: 9%
- Part-time job: 6%
- Property: 2%
- Releasing capital/equity from home: 1%
The information contained in Prudential UK's press releases is intended solely for
journalists and should not be used by consumers to make financial decisions. Full
consumer product information can be found on the Prudential website.
Notes to editors:
* Online survey conducted by Research Plus between 3-10 December 2009 among 6,073 UK
adults aged 45+.
** Basic state pension for a single person: £95.25 per week x 52 weeks = £4,953 per
year. Basic State Pension for a married couple: £152.30 per week.
*** Pensioner Income & Expenditure ch.11. Published 27th January 2009
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