The average person retiring in Britain today is looking forward to an annual income equating to almost 24% less than the minimum wage, according to research carried out by LV=.
Upon retiring, pensioners are going to have to cope with living with less, as the average income drops by two thirds. The average salary for the over 60s is currently £25,480, but after retirement the average income, including the state pension, is just £8,774.
Not only are retirees having to deal with this sharp decline in their income but many are still dealing with debt too. The traditional pattern was for people to have paid off their mortgage by the time they leave work, but this is no longer the case with 7% of those questioned still dealing with an outstanding mortgage. On top of this 12% have outstanding credit card debt and 5% report being overdrawn.
This may be one of the benefits of Chancellor George Osborne's recent Budget announcements regarding more flexibility with pensions. With retirees soon to be able to choose how they want to use their pension pots, many may use this opportunity to pay off outstanding debt.
Pensioners are going to have to carefully consider how to make the most of their pension savings, with 58% of those close to retirement expecting their outgoings to rise or stay the same when they leave the workplace.
Many pensioners are having to change their retirement plans altogether to deal with this financial stress, with 30% of those still working aged between 60 and 69 doing just that, and 85% stating they now expect to retire later than planned.
When looking at the decade leading up to retirement, 17% of those aged 50 to 59 believe they will have to work past the state retirement age due to financial reasons. However, a late retirement does not always have to be looked at in a negative way. Many pensioners feel isolated, bored and frustrated when they retire and remaining in work can be a great way to deal with these problems and, happily, 19% of those questioned plan to work past their age of retirement through no other reason but choice.
The pattern appears to be that people are planning to delay their retirement rather than focusing on saving, as over the last year 10% of those questioned have decreased the amount they are putting away for retirement by an average of £600 a year.
Richard Rowney, LV= Life and Pensions managing director, said: "Brits approaching retirement today are under huge financial pressure, as their retirement savings are being stretched over a much longer period of time than before. Whilst undoubtedly having a longer retirement is a good thing, it means that making the right choices on how to fund your retirement is now one of the biggest financial decisions you have to make.
"It's clear that today's retirees leave work with far more financial commitments to contend with than previous generations meaning their money has to go further for longer. Given that the age at which you stop earning a wage can have a significant impact on how much you have to fund your post work lifestyle, it is not surprising that many are choosing to delay retiring.
"The Chancellor's latest Budget has given retirees even more choice and greater flexibility as to how they use their pension fund. Although the vast majority of people will experience a drop in income when making the transition from working life to retirement, considering all the income options available and seeking financial advice will help to ensure that retirees are able to make the most of their savings and select a solution that best suits their needs."
Delaying retirement is one way to keep active and improve your financial situation but no one can predict the future and over time your circumstances, or outlook, could change. That is why we all need to think about putting a little away as a nest egg for later life. How you go about that, perhaps through a pension, ISA or other investment, is entirely up to you, but it's worth taking a look at your options as early as possible to make the most of your choice.
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