More pensioners face poverty
More than a third of pensioners planning to retire this year, will live on incomes below the poverty line, according to new research from Prudential.
Using the Joseph Rowntree Foundation's accepted minimum income of £14,400 a year, Prudential calculates that 35% of retirees this year will have incomes below this threshold. It also reveals that 19% of would–be pensioners will receive just £10,000 a year.
Women will be worse hit with 40% receiving below £14,400, compared to 30% of men. More worrying still 26% of women will get below £10,000 a year compared to 13% of men.
Tough financial decisions
Vince Smith-Hughes, head of business development at Prudential says an increasing number of people "face tough financial decisions."
He says people should consider reviewing their finances with an adviser on an annual basis in the years immediately preceding retirement.
He adds: "Following the simple advice to start saving as much as you can as early as you can should help to secure the retirement income you want and need."
"Making voluntary national insurance contributions should also help to boost retirement income for people who have had breaks in national insurance payment during their working lives."
Prudential's research comes after news in last week's budget that the state retirement age will be increased to 66 by 2020 and that a flat rate state pension of £140 will eventually be introduced, although current pensioners won't benefit from these planned changes.
A scheme originally established in 1944 to provide protection against sickness and unemployment as well as helping fund the National Health Service (NHS) and state benefits. NI contributions are compulsory and based on a person’s earnings above a certain threshold. There are several classes of NI, but which one an individual pays depends on whether they are employed, self-employed, unemployed or an employer. Payment of Class 1 contributions by employees gives them entitlement to the basic state pension, the additional state pension, jobseeker’s allowance, employment and support allowance, maternity allowance and bereavement benefits. From April 2016, to qualify for the full state pension, individuals will need 35 years’ of NI contributions.