But nearly a third (31%) of the people surveyed in Prudential’s nationwide Class of 2010 study either do not know how much the basic state pension pays or over-estimate the individual weekly amount by £25 or more.
Prudential warns the basic state pension alone may not provide sufficient retirement income for many and urges people who are still working to save as much as possible for their old age in company and personal pensions as well as savings and investments.
“Given that so many people expect to retire on the basic state pension, particularly when only half know how much it pays, there is still a clear need for people to understand the consequences of not making adequate provision for their retirement,” said Martyn Bogira, director of defined contribution solutions at Prudential.
“If the basic state pension is your only source of income you could be in an extremely precarious position financially. Just one significant financial emergency, like your central heating system unexpectedly breaking down, could cause serious financial hardship for people expecting to retire on the state pension alone.
“On its own the basic State Pension, paying just under £5,000 a year, should only really be used to supplement other sources, such as income from a pension or an annuity.”
Average expenditure in households headed by someone aged 65 to 74 was £321 a week, according to the most recent Office for National Statistics figures from 2007, and £218 a week for households headed by someone aged 75 or over, but today the basic state pension for married couples lags behind this figure by paying £152.30 a week.
Prudential’s survey has found that the state pension will, on average, account for just over 34% of income in retirement for those people who say they plan to retire in 2010. Other sources include:
- Income from company pension schemes: 36%
- Other savings and investments: 11%
- Personal pension: 9%
- Part-time job: 6%
- Income from property (e.g. rental income): 2%
- Releasing capital/equity from home: 1%