Once the average worker hits retirement, they face a 60 per cent cut in income as they attempt to rely on their pension funds, reveals a report.
According to statistics from the Fidelity Retirement Index, pension savings and state benefit entitlements of UK workers will only account for 42 per cent of their expected final salary.
For example, the company estimates that if someone was earning an average of £22,900, their retirement income would amount to £9,618 or £185 per week before tax, which is less than someone working 40 hours a week on the minimum wage.
The report suggests that there is a "two-tier pension nation" emerging. It found that those with defined benefit pension schemes were on course to replace 81 per cent of their expected final earnings.
This far exceeds the target of the Pension Commission's proposals that seek to allow the average worker to replace at least two-thirds of their salary with pension provisions.
In contrast to this, the average worker with defined contribution pension plans will see their income reduced by almost two-thirds.
Simon Fraser from Fidelity International argues that industry and the government need to do more to ensure people not only put money aside for their pensions, but also save in the right way.
Average pension funds amount to little more than minimum wage, says report
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Average pension funds amount to little more than minimum wage, says report
Fri, 12 May 2006
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