Let's hope you are sitting down because this may come as a shock. It turns out that a lot of Brits are not saving enough.
According to Prudential: “One in seven (14 per cent) people planning to retire this year will depend on the State Pension as they have no other pension.”
The Prudential analysis also reveals that nearly one in five (18 per cent) of those planning to retire this year will be below the poverty line. The Joseph Rowntree Foundation estimates that to be above the poverty line a single pensioner in the UK needs an income of at least £8,254 a year, yet 18 per cent of those retiring in 2013 expect to retire on less than this.
The findings also highlight a significant gender divide, with 21 per cent of women expected to retire below the poverty line in 2013 compared with 14 per cent of men. In addition, women are nearly three times more likely than men to have no other pension - 23 per cent of women retiring in 2013 will retire without a private pension, compared with just 8 per cent of men.
The truth is that the retirement of the baby boomers, something we are only just beginning to experience, will provide the single biggest challenge to the UK economy over the next few decades. Indeed the US and much of Europe face a similar challenge.
You could say that what is happening in the UK now happened in Japan 20 years ago.
What is the answer?
From a micro point of view it is for us all to save more. But if we all save more, the result may be recession and falling wages, which in turn may make it harder to save.
From a macro point of view we need investment into innovation, infrastructure and just in trying to create a more dynamic and stronger economy. Or we need more immigrants, which is not an idea that is likely to prove very popular.
© Investment & Business News 2013