Pensions minister Steve Webb says 13 million people will see a drop in living standards when they retire, far higher than previous official estimates.
New research from the Department for Work and Pensions published to today will show that although the need for income often reduces sharply in retirement, as people no longer have to pay housing costs and change their lifestyles, large numbers of people will still see a significant fall in their standard of living.
The research says that lower earners need to receive 70 per cent of pre-retirement income to maintain their standard of living, while higher earners need to receive 50 per cent of pre-retirement income.
Writing in the FT today, Webb says the drop in living standards is due to a combination of poor state pension entitlement and the decline of workplace pensions, as well as low levels of personal saving.
Webb says the current reforms of the basic state pension and the introduction of auto-enrolment will see at least 1 million people avoid the disappointment of a significant drop in living standards and this could be higher is state pension reforms encourage higher levels of personal saving.