Nearly two million retirees have less disposable income than an 11-year-old child, according to research from insurer LV=.
The annual State of Retirement Report from the retirement specialist shows that 15% of British retirees currently have an income of £154 or less per week.
Average weekly essential living costs are estimated to be £146.90 according to data from the Office for National Statistics, which leaves these pensioners with less spare change than the average weekly £8 pocket money that an 11-year-old receives.
Worryingly, the next generation of retirees may fare even worse. According to the LV= report, some 27% of over-50s have saved nothing towards their retirement and will have only the basic state pension to fund them once they stop work. When the new flat-rate pension comes into force in 2016 this will amount to £144 per week, which is less than today's estimated living costs.
Ray Chinn, head of pensions at LV=, says the next generation of retirees will be in a "precarious financial position" and that it is vital they start planning for this phase of their life. "Putting away enough for a comfortable life after work is not easy, but we would urge people to plan ahead in order to avoid a future where they might be less wealthy than an 11-year-old. It's never too late to make a difference," he adds.
Georgina Smith, managing director at equity release specialist Stonehaven, says the problem is that "annuities no longer provide the extra income that everyone expected'. She says many retirees and pre-retirees may have to look at other ways of generating income in retirement, including use of some of the equity in their homes.
This article was written for our sister website Money Observer