One in seven people will have to rely on the state to provide them with an income during their retirement, worrying new research reveals.
Of people planning to retire this year, 14% told Prudential they will have to depend on the state as they have no other pension. Women are three times more likely than men to retire with only a state pension, the insurer said.
The data – published as part of Prudential's Class of 2013 research – indicates that one in five of those retiring in 2013 will end up living below the poverty line.
The Joseph Rowntree Foundation estimates that to be above the poverty line a single pensioner in the UK needs an income of at least £8,254 a year, but Prudential says 18% of those retiring in 2013 expect to retire on less than this.
Even taking into account people's workplace and personal pensions, the state will provide 36% of the average retirement income in 2013.
Retiring below the poverty line
Vince Smith-Hughes, retirement income expert at Prudential, said: "Against a backdrop of rising living costs, the basic state pension alone is not nearly enough to provide a comfortable standard of living. Relying on the state will see many people retiring below the poverty line this year."
Women are far more likely to need the state to support them in retirement – with the state pension accounting for 43% of their retirement income in 2013; while the average man retiring this year will receive 30% of his income from the state.
This is largely due to women taking long career breaks to help raise children. Recent research undertaken by Duncan Lawrie Private Bank indicates that women taking a five-year break during a 40-year career on an average salary could leave them with a pension pot shortfall of as much as £70,000.
"While it's a very valuable source of additional income for millions of pensioners, the State Pension should ideally only represent a part of someone's retirement income, not all of it," added Smith-Hughes.
Regionally, Prudential said people retiring this year in the East Midlands are the most likely to rely on the State Pension (21%), compared to those in the West Midlands who will be the least reliant, with just 10% claiming that they'll be relying on the state pension for their whole retirement income.