Three million added to UK pension hardship figures
UK – Three million more people face financial hardship upon retirement in the UK than they did in 1996, according to an annual report conducted by J P Morgan Fleming.
The latest study, Pension Map of Britain 2001, shows that 12.6m (or 46.3%) Britons will face financial trouble in 2001, compared to 9.9m (or 40%) in 1996.
At the same time, the number of those retiring with a ‘comfortable’ pension has dropped from 10.8m (43.2%) to 9m (33%).
According to the report, the number of people likely to face hardship in retirement has grown steadily every year since 1997, but 2001 saw the turning point as the figure fell by 700,000 from the previous year.
“ These figures seem to reflect the trend that there are currently more people retiring from the workforce than entering, with for example, the baby boomers from the 1940-50s starting to retire,” says Peter Hiscock, pensions product development manager at J P Morgan Fleming.
“ The uncomfortable message still is that people are not making enough financial provision to enjoy a comfortable retirement. We suspect that people’s expectations are higher than actuality and there are currently huge shortfalls in their pension provisions, which needs to be addressed sooner rather than later,” he adds.
The report also found that the pension provision gender gap has closed and that fewer women are facing financial hardship in retirement than men for the first time. According to the research, 53% of men and 51% of women in UK face a difficult, or even a poverty line, retirement at the moment.
“ The positive trend for_women could partly be attributed to the result of more part-timers, who trend to be women, now being included within pension schemes plus the positive impact for women of pension sharing on divorce,” says Hiscock.
The report shows again that self-employed people are the financially worst off group in retirement, with 68% not saving enough for their retirement, compared to 54% in 1996.
It also highlights the increase in financial problems faced by those in their 50s: the research completed in 1996 shows that 1.2m 50-59 year-olds would see a financially difficult retirement, while that figure has risen to 2.1m for 2001.
Hiscock says: “ This increase is probably largely the result of the well documented decline in annuity rates. If annuity rates continue to their current levels and are allied to rising life expectancy rates for both men and women, the number of older people who will not have sufficient income in their retirement will continue to remain high.”
The research covers those of current working age, which includes both full-time and part-time workers and those currently not in employment.
According to J P Morgan, a person has a ‘difficult retirement’ if their pension income is between 25% and 40% of their final salary. A financially ‘comfortable’ retirement is achieved with a pension worth 50-66% of one’s final salary, says the company.