The Government is on the brink of introducing the biggest shake-up in the pensions industry for a generation. Starting in October, bosses will be forced to pay into a pension for their workers for the first time in an attempt to increase the number of people with a pension.
All workers aged between 22 and the State pension age will be automatically enrolled into a scheme if they earn £8,105 or more. They will be able to opt out. The full State pension will jump by £5.30 next week to £107.45 – the biggest cash increase since 1908.
A sixth of this year’s retirees plan to depend entirely on the state pension but few know how much they will actually get, Prudential research has found. The provider said while six in ten plan to depend on the state about a quarter of people polled overestimated how much they would get or simply did not know. Its Prudential Class of 2012 report also showed women are more than twice as likely as men to have no pension. Some 20% of women retiring this year will depend on the state pension compared to 8% of men. The Prudential report is based on interviews with 9,614 adults over the age of 45, including 1,003 who will retire this year. The research says women are twice as likely as men to have no company pension. It says 20 per cent of women who retire this year will depend on the State pension as their only source of retirement income, compared with only 8 per cent of men.
To make matters worse, millions of women do not even get the full State pension, currently worth £102.15 a week, and have to retire on even less money at a time when households bills, from food to petrol, have reached record levels. The Prudential pointed out that many women who will be relying on the State pension do not even know what it is currently worth. More than a quarter retiring this year either thought it was worth far more than it actually is, or said they ‘simply did not know’.
Vince Smith-Hughes, retirement income expert for Prudential, said: “While the state pension is a safety net for pensioners in the UK, it should only ever be regarded as part of an overall retirement plan. “For far too many people, the state pension has become the default income option in retirement. Even those who have some private provision depend so heavily on the state that it makes up a third of their retirement income.” “If people want to maintain their standard of living in retirement it is important that they start to save as much as possible as early as possible, and the vast majority should join company pension schemes where possible.
“Seeking early advice from a financial adviser should also be a prerequisite to helping people achieve the level of retirement income they want and need.”