Fewer than one in 10 face pension poverty, thanks to property

Fewer than one in 10 people over the age of 50 will suffer an impoverished old age, the Institute for Fiscal Studies (IFS) has said in a report.

The research body looked at the likely retirement income of people over 50 but below the state pension age.

It took into account state and private pensions as well as money tied up in property and any likely inheritance.

The group concluded 9.8% of people would have an inadequate income in retirement.

Lower estimate

The IFS figure is much lower than the estimate of future poverty calculated by the government's Pension Commission.

Amongst older workers, at least, the fraction retiring with inadequate resources may not be as high as the first report of the Pensions Commission estimated Gemma Tatlow, report author The dangers of mixing property and pension saving

In a report into the UK pensions crisis published last year, the Pension Commission found that 38% to 43% of people in the over-46 age group were headed for retirement poverty.

The discrepancy between the two figures can be explained by the fact that the IFS looked at income that could be generated by all forms of wealth, including property and inheritance, rather than just pensions.

In addition, the IFS looked at people as part of a family unit, rather than as individuals.

Private pension shortfall

In total, the IFS estimated that 730,000 individuals in England in the over-50 age bracket are headed for an impoverished retirement.

Nevertheless, the IFS warned that savers are falling into the trap of overestimating how much their private pensions will pay them.

"Our analysis shows that amongst older workers, at least, the fraction retiring with inadequate resources may not be as high as the first report of the Pensions Commission estimated," Gemma Tatlow, one of the report's authors said.

"However, despite this we find that many individuals may not receive as much income from private pensions as they expect, unless they plan to change significantly their behaviour over the next few years," she added.

The government's Pension Commission, chaired by Adair Turner, is due to report in November on how Britian should bridge the pensions gap.