Could you live on £110 a week? A quarter of workers aged 55 or more are banking on this sum funding their retirement. Thanks to the rising cost of living and a lack of financial know-how, thousands of Britons approaching retirement are not paying into a pension plan and instead will have to survive on the state pension.
According to a survey by Confused.com, a third of working Britons are not paying into a pension and less than one in five of these have any savings or investments to fall back on. Instead, these workers are relying on the state to fund their retirement. It could be a risky bet, as an increasing number of people overestimate how far a state pension will stretch to cover their financial needs.
One in six over 55 year olds expect to be shouldering credit card and mortgage debt into retirement - putting extra strain on their pension income.
Such is the rising cost of living, that 50% of worker aged over 50 are considering moving abroad in retirement. Spain topped the list of potential retirement destinations, followed by France and Italy.
deVere Group’s poll, recently carried out by Censuswide revealed that the cost of living is the number one concern of those approaching retirement.
Kate Rose, head of annuities at Confused.com says: "Retirement should be the time when we put our feet up and enjoy life after decades of work; yet so many of us are underprepared. It’s staggering that so many people due to retire in the next 10 years are unaware of their options."
Last week it was revealed that shopping around before you purchase an annuity can mean an increase in your annual pension income of up to 120%.
Exercising your open-market option before securing your retirement income is essential in order to maximise the largest possible pension income.
Buying an annuity is a once in a lifetime experience - that interest rate will determine a retiree's income for the rest of their life. The Association of British Insurers (ABI) confirms that the difference between the average worst and best annuity rate is 26% - but even though it is guaranteed to help get you extra cash in retirement, not all pension investors take advantage of the choice on offer. In fact, more than half of annuity purchasers buy directly from an insurance company.
Tom McPhail, head of pensions research at Hargreaves Lansdown said: "Pension investors lose more money from making poor retirement income decisions than at any other point in the life of their pension. Shopping around at retirement is absolutely vital."