Up to 20% facing large income falls in retirement

The research examined estimated retirement income in light of recent concerns about the adequacy of many individuals' resources following retirement. However, the research also considers the definition of retirement income, acknowledging that many households may have other sources of finance such as inheritance or savings. Under these, broader, definitions, only a fifth of those between 50 and State Pension Age would see an income reduction of 20% or less, and at least 90% could achieve two thirds of their pre-retirement income.

It was also predicted in the report that one-in-eight individuals approaching retirement would retire on an  income from state and private pensions of less than the Pension Credit Guarantee level (currently £142.70 per week for single people) and would therefore be reliant on state means tested benefits to ensure they had an income at this level.

Cormac O’Dea, a senior research economist and one of the authors of the report said:

“In assessing how prepared households are for retirement, it is extremely important to take into account the fact that many households can  fund their retirement from sources other than their pensions. Retirement  resources are not the same thing as pension income. Taking into account only income from state and private pensions, two-fifths of those approaching the  state pension age will see their income fall by more than a third on  retirement. However, using a comprehensive measure of income, the  proportion facing such large income falls on retirement is just one-tenth.”