Retirement Funding from Private Pensions on the Rise

Income from private pensions will overtake state provisioning to fund pensioners through their retirement from next year, new figures show.

In 2006, state benefits will comprise less than half of the income for the average pensioner, according to a report from Prudential and Datamonitor.

Currently, 27 per cent of pensions' income comes from occupational schemes, three per cent from private pensions and just one per cent from property. A further nine per cent is made up from investment accounts.

But the Pensioner Pound study reveals that in ten years time, the money from private schemes is set to increase to 4.5 per cent, property income will triple to three per cent and investments will account for 10.5 per cent.

Ali Crossley, director for lifetime mortgages at Prudential UK, said: "This is a significant moment for retirement provision 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."

"The key to taking responsibility is planning ahead. We need to decide on the retirement lifestyle we want - and we need to think about how we will fund it. We can’t rely on get-rich-quick schemes or on a lottery win. Instead we need to make a sensible judgement about how much to save and what other assets we can rely on," she added.

Many people plan on downsizing or taking out a life time mortgage to fund themselves.

But those who plan on moving should take care that costs do not eat into their equity. Those who opt for a lifetime mortgage should consider how much money they will drawdown and when they plan to do this. Some will be better off taking out a flexible plan than a lump sum.