COMMENT
How To Avoid Pension Poverty

By Cliff D'Arcy
December 9, 2005

According to new research from the Pru, one in six pensioners (17%) live on less than £5,000 a year, with a third living on under £7,500 a year. Think about it: £5,000 a year is less than £100 a week, which is what many people spend on their leisure and entertainment expenses. It's scandalous!

Furthermore, the Pru's latest Retirement Index reveals that almost a fifth of pensioners struggle to make ends meet and still live a comfortable life. Hence, often to meet their financial commitments, one in five returns to work after retiring. A twelfth of pensioners (8%) are forced to subsidise their living costs by using assets - often their family home - which had been earmarked for inheritance.

Perhaps the Pru's most miserable statistic is that one in fifty pensioners (2%) say money worries are so bad that they've considered suicide. Anyone even thinking in these terms should read this powerful and moving post on our Dealing with Debt board from a doctor who has had to deal with the aftermath of people taking their own lives.

What's more, three-fifths of pensioners (60%) have had to cut back to make ends meet in the last six months, even curbing their spending on everyday essentials. For example, almost one in five (18%) has cut back on heating and electricity, one in eight (12%) has cut back on food, and one in sixteen (6%) has cut back on medication and GP visits. These figures make for grim reading, especially with one of the coldest winters on record said to be on the way.

For the record, the majority of pensioners (57%) live on less than two-thirds of the average wage (roughly £25,000 a year), while only 1 in 25 (4%) have an annual income of over £25,000. On the bright side, it's not relentlessly bad news: just over half of pensioners managed to go on a foreign holiday in the past two years.

So, what can you do to avoid the misery of pensioner poverty? These five rules are a good foundation for thinking about retirement issues:

• As business gurus say, "If you fail to plan, you plan to fail," so the first rule is to plan ahead. As always, by ignoring the problem, you make it many times worse.
  
  
• The second rule is to start early, because £1 invested into your pension when you're 25 is worth many times the pound invested at age 55.
  
  
• The third rule is don't rely on the State, because a larger and larger proportion of pensioners' income is coming from private and occupational provision. Anyway, you shouldn't trust any government, because they're always packed with politicians!
  
  
• The fourth rule is to spread your risk. Don't put all of your eggs into one basket, such as staking your future on selling your home and downsizing. Instead, aim to have a mixture of assets, including property, shares, cash and so on.
  
  
• The fifth rule is only rely on yourself. It's up to you to do the legwork, because only you have your best interests at heart. By all means, take whatever help that your employer can offer you, but don't stop there; this article includes seven simple tips on how to get cracking.

As for people who are already retired, there are a number of ways to boost your income, such as the Pension Credit and other means-tested benefits, including Council Tax Benefit and Housing Benefit. The government recently announced they were streamlining the application forms for these three benefits, which will make it far simpler to claim them.

Great websites to learn more about increasing your retirement benefits include EntitledTo, Help the Aged and Age Concern. If you have any elderly relatives who could do with some assistance with their finances, lend them a helping hand or put them in touch with a local or national charity for the elderly. It's the least you can do!

More: Visit our Get Out of Debt and Pensions centres | The Crazy World Of Pensions!