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State’s share of retirement income falling below 50%

From next year, the state will no longer provide the majority of retirement income in the UK, according to research by Datamonitor and Prudential.

The report shows that in 2006 state benefits will account for less than half of the average pensioner’s income. The figure is currently 51 per cent but is forecast to drop to 44 per cent by 2014.

Pru says that as state ben- efits make up a smaller proportion of the average pension, other sources of retirement income will grow.

As well as a retirement plan encompassing many different sources of income, other forms of saving, such as other investments and property, will also increase, says Pru. It says this may have to be incorporated with plans to work longer to generate the extra income required in retirement and the possibility of people facing the need to go back to work after retirement.

The report says occu- pational pension schemes account for 27 per cent of the average pensioner’s income and this is not set to change significantly over the next 10 years. However, the characteristics of schemes will change as the UK continues to move away from final-salary to defined-contribution schemes. At present, private pensions account for 3p in every pound but this is forecast to increase to 4.5p, with investments ris- ing from 9p to 10.5p.

Pru director for lifetime mortgages Ali Crossley says: “This is a significant mom- ent for retirement provi- sion in the UK. We are fast approaching the point in time when the state ceases to provide the majority of UK retirement income and the onus of retirement funding will pass to the individual.”

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