Six million Brits have no retirement savings
There are 6.25 million Brits over the age of 50 who have no pension plan in place and are set to retire on just the basic state pension, according to LV='s State of Retirement Report.
This will be a huge increase on the 1.2 million people who live solely on state pension today.
The basic state pension adds up to an income of £5,587 a year, increasing to £9,672 when you add in additional income from pension credits and other benefits. This is well below the £11,477 annual income someone would receive if they were working full-time on the minimum wage.
Even when the government's plans to introduce a Universal State Pension at £140 a week come in, a pensioner's annual income will still be significantly below the minimum wage.
Less than minimum wage
"It is worrying that so many people are saving little or nothing for their retirement 'wages' but instead expecting to fall back on the state pension.
"While working hard up to their retirement to bring home a decent wage, I'm sure many will be disappointed to retire with an income equivalent of less than the minimum wage," says Ray Chinn, head of pensions at LV=.
"If more people reflected on their pension as a 'wage' that they will potentially be relying on for more than two decades, they might feel more inclined to plan ahead," he adds.
In exchange for any lump sum – usually your pension fund – an annuity is “bought” from an insurance company and provides an income for life. When you die, the income stops. Annuity rates fluctuate daily and depend on your sex (although from 21 December 2012 insurers will no longer be able to use gender as a factor when calculating annuities), age, health and a number of other factors, so you have to pick the right one and, once bought, its terms cannot be altered, so seek financial advice.