Recent research by Prudential has uncovered that 18% of people set to retire in 2010 will do so without any personal pension.
This year’s retirees could be in for a shock however, as many of those surveyed were unaware of the value of the basic state pension. 31% either did not know what they would get, or overestimated the amount by around £25 per week.
Currently the basic state pension is worth £95.25 per week to a single retiree and £152.30 to married couples. However, figures from the Office for National Statistics show that on average, households headed by a 65 to 74 year old will spend £321.00 per week.
Prudential’s Director of Defined Contribution Solutions, Martyn Bogira, said: “If the basic state pension is your only source of income you could be in an extremely precarious position financially. Just one significant financial emergency, like your central heating system unexpectedly breaking down, could cause serious financial hardship for people expecting to retire on the state pension alone.”
For people planning to retire this year, the research showed that the state pension will make up 34% of their income. Just 9% of income will come from personal pensions, 11% from savings and investments and 36% from company pension schemes. Part time jobs will account for 6% and equity release 1%.
Geoff Charles of award winning Equity Release specialists Bower believes that in the future, equity release will make up a higher percentage of retirement funding aspirations; clearing debts to increase disposable income and supplementing retirement income or savings.
He says, ‘With final salary pensions now less common; and money purchase pension schemes becoming more common, we now have the specter of unknown private pension maturity amounts. These amounts will be dependent upon the total contributions and prevailing annuity rates on encashment and are often not as high as final salary pensions. Therefore with the added problem of so little being earned from savings and investments at this time, I’m of the opinion that equity release will be increasingly used to make up retirement income through drawdown and regular cash release products.’
Bower is an FCA regulated independent financial advice company that offers specialist advice on equity release throughout the south of England. For more information e-mail [email protected] or call [tel]. Bower offers a no obligation initial consultation to homeowners considering Equity Release.