Pensioners May Need Credit Cards To Live On
An experiment run by pension provider AXA has revealed that the state pension will be insufficient for the pensioners of tomorrow to live. Many may have to turn to credit cards just to make ends meet after the experiment, involving 26 households challenged to live on the current state pension for a week, revealed that most had spent the money within 3 days.
A separate survey by Scottish Widows revealed that more than a quarter of adults (26%) are not yet making any provision for their retirement, yet the average amount people hope to retire on is £29,479 a year.
In reality, the average pensioner income is not much more than half of that, at £16,172 a year, and only one in 12 people currently have any hope of saving the amount of money required.
Worryingly, 11% of those who undertook the experiment plan to live on their state pension once they retire.
For the experiment single people were given the current state pension amount to live on, which is £114.05 a week, with couples receiving £174.05. Apart from one, all the households overspent with the largest overspend being £327.18.
What is a concern is that those planning on living off the state pension may resort to unsecured credit such as credit cards or authorised overdrafts to make up the shortfall.
Single women who took part in the experiment were the worst offenders, spending their allowance in just two and a half days and overspending by a whopping 200%.
The couples involved lasted three days and overspent by 168%.
The men involved faired best, lasting four days before spending their budget, overspending by a more moderate 79%.
Colin Nelson of AXA added: “ The results from our ‘Living on a State Pension’ experiment highlight some worrying trends.
“ The fact that we struggle to survive on this small amount is not surprising in itself, but it is people’s attitude towards funding their retirement that concerns us most.
“ The experiment has acted as a wake-up call for those who took part. Now we want to communicate that to the rest of the nation.”
Ian Smith, head of pensions market development at Scottish Widows, said: “ The truth of the matter is quite simple – if you want to have a fairly comfortable retirement you should be saving at least 12% of your earnings year in, year out from the age of 30 until retirement at 65.”
Alisdair Milton
21st September 2006
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