28 April 2009 / by Rebecca Sargent
Pension drawers are struggling to make ends meet as the gap between pension income and retirement expenditure grows, a report from the Pensions Policy Institute (PPI) has revealed.
According to the report, the minimum income required by the average single pensioner to meet basic needs is £120 a week, while to achieve an adequate standard of living, a median-earning pensioner would require £250.
The basic state pension is currently £95.25 a week, showing a clear gap between the amount required for basic needs and the amount received from the Government.
For some, a private pension may boost this, but for others, alternatives may be required, according to the PPI. One of the main findings of the report is that none of those modelled in the report – even high earners – are able to meet a replacement rate calculated to replicate their working life standard of living, which is where alternatives like equity release or savings could come in.
Commenting, Niki Cleal, PPI director said: “This research shows that pensioners will need a range of assets and sources of income to help them cope with the uncertainty and extra costs they may face later in their life as a result of the onset of a disability, widowhood or the need for long-term care.”
He added: “this report sets the scene for future research, which will examine the ways in which different types of assets – in particular housing, pensions and other financial assets – can help individuals to meet their needs and expectations for retirement income.”
Speaking of the Government’s current state pension system and the PPI research, Liberal Democrat shadow work and pensions secretary, Steve Webb said:
“The basic state pension is simply too little to live on for the millions of pensioners who have no other income. Pensioners should not be forced to rely on complex means-tested benefits in their retirement, which has put many off from even claiming.
“We need a more generous, universal pension based on citizenship which would give all pensioners enough to live on, whatever their age,” he added.
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