1 in 10 slip into low-income on retirement
Published on 05 February 2014 01:00 AM
More than 1 in 10 high and middle-income households slipped into low-income soon after they reached State Pension Age, according to a new report commissioned for Age UK.
The report by NatCen Social Research found that 6% of previously high-income households and 5% of middle-income households are living on less than £293 per week for a couple or less than £197 per week for a single person - just above the poverty line.
The study is based on analysis of data from the English Longitudinal Study of Ageing (ELSA). It concludes that those most likely to find themselves slipping into low-income had worked in a skilled trade, administrative work or sales or become single through bereavement or separation.
In addition, they were unlikely to have private pension savings and likely to have stopped work.
Number of people aged 65 and over set to rise to over 16 million
In total, according to the study, 1.9 million pensioners are struggling to live on just £13,312 (couples) or £8,944 (single person) annually.
With the number of people aged 65 and over set to rise by 48.7% in the next 20 years to over 16 million, urgent action is critical to head off the looming crisis.
Maximising income in retirement is the subject of the second of Age UK's Financial Services Commission's summits taking place in London on 6 February.
The Commission brings together Government and leading industry figures and will consult with older people on ways to build up financial resilience - a way of enabling people to financially withstand challenges that may crop up in later life.
Society ‘woefully unprepared for the UK's ageing population.'
The first summit in December 2013 focused on how to help those approaching retirement build up adequate savings.
The Commission follows and was inspired by Lord Filkin's report earlier in the year which warned that Government and society are ‘woefully unprepared for the UK's ageing population.'
A significant number of current pensioners in the UK are already struggling financially.
Age UK's latest tracker poll which monitors the way older people are responding to the UK's current economic climate shows that more than one in four people (27%) aged 65 and over say they are just getting by financially.
With many of us living longer, it's crucial that we tackle this
Tom Wright. Age UK's Group Chief Executive and Co-chair of the Financial Services Commission, said, ‘We can't put our heads in the sand when it comes to being prepared for retirement.
‘With many of us living longer than ever, it's crucial that we tackle this now and come up with ways to enable people to maximise their income in retirement, particularly in light of historically low interest rates.
‘If not, we will face a bleak future where later life will become synonymous with struggling to make ends meet for many of our older people.'
Dr Alexander Scott, Chief Executive of the Chartered Insurance Institute and Co-Chair of the Financial Services Commission said, ‘With complex issues to think about, like annuities and other finances, a few decisions made early in retirement will have lasting effects.
‘These research findings and others like them highlight once again the need for a fundamental rethink about how issues like annuities, decumulation, equity release, and above all information and advice around all these matters are handled.'
The Financial Services Commission will report its findings in summer 2014.