Spend today without worrying about saving for tomorrow is a state of mind undermining pension saving.
Millions of people make no effort to save for their retirement while working and expect the meagre state pension of around £7,000 a year to cover their bills.
Instead of saving to give a safety cushion between paying day to bills and the occasional luxury, workers in their 50s are blindly heading for future money problems that mean they will have to carry on working longer than they wish or accept living on the poverty line.
Research by think tank the Pensions Policy Institute (PPI) shows that 86% of retirees are dependent on the state pension and benefits for all their income.
Consistent income stream
Even though younger retirees are less reliant on state help, as they age and their savings run out, they end up just as dependant as their older counterparts.
For example, the report says pensioners born in the 1930s received 30% of their income from the state pension at age 65, which increases to 44% when they reach 74 years old.
Timothy Pike, head of modelling at the PPI, said: “The state pension is a consistent source of income when other sources may lose their value or be completely lost.
“It has helped to protect women in widowhood against the loss of a husband’s private pension income.
“In future the state pension will underpin a system which places more responsibility upon individuals, providing long-term protection against changing circumstances and inflationary pressures.”
Modest sum of money
The research was carried out for charity AgeUK, whose director Caroline Abrahams pointed out that many people are surprised to find out the state pension is only worth around £7,000 a year.
“This is less than half the annual salary of a full time working adult on the minimum wage of £7.50 an hour,” she said.
“Yet relatively modest though this sum may be, the state pension is still the main source of income for millions of older people in this country, a situation that is set to continue for the foreseeable future.”
The research warns that the state pension gives less than half the retirement income most people want and is not designed to give most people the stand of living that they expect.