25th February 2016
The state pension accounts for less than 50% of retired households’ income new figures from the Office for National Statistics show.
On the surface, this looks like encouraging news, in that people are making more personal provision for a more comfortable retirement.
But Kate Smith, head of pensions, Aegon believes it should not be a cause for complacency for those of working age, saving for retirement.
She added: “The current generation of retirees are benefitting from private pensions they built up with gold-plated defined benefit pensions and favourable tailwinds such as decades of rising house prices, economic growth as well as the Triple Lock state pension.”
But today working population’s incomes are stalling and generous defined benefit pensions are few and far between. As such for those retiring in a decade, the situation will be very different.
Smith said: “Every generation aspires to have a better financial future than the previous generation but this will not continue unless people make adequate pension savings and start saving as early as they can.”
She noted that to build up an amount equivalent to the State pension you need to have private pension savings of around £200,000..
Smith added: “The median income for retired households is £21,000 a year (2014/15), well below the median income for non-retired households of £28,300 a year. But since the economic downturn in 2007, retired households’ median income has increased by £1,500 on top of inflation compared to a fall of £900 for working households.
“This is clearly an inter-generational issue, as the next generation to retire is less likely to benefit from a combination of a generous State pension increases and gold-plated defined benefit pensions.”