Retirement Income Still Low With Pension Reform

The typical UK household is still facing a 50 per cent fall in income on retirement, despite government plans to address the problem, new figures reveal.

Investment management group Fidelity International claims that workers should start saving for retirement immediately.

Commenting on the government's white paper on pensions reform, Simon Fraser, president of Fidelity's institutional business, said: "People should not be lulled into a false sense of security by these reforms. Obviously they are welcome, but for the typical household it will not have the impact on their standard of living in retirement that people are expecting, especially as these reforms are not going to happen overnight."

Mr Fraser added that earnings-related state pension will not be brought in until 2012 and urged workers to take action now to ensure they do not face a steep drop in income when they retire.

Fidelity estimates that £1 invested in a pension by a 30-year-old today will become around £5.44 at retirement, while £1 invested at 50 will only become £2.26 in 'retirement pounds'.

Under plans unveiled this week as part of the pensions white paper, the state pension age will increase to 68 for men and women from 2044 and the link between earnings and state pension will be restored.

The government also intends to create a new national savings pensions scheme (NPSS) that will be targeted at workers on low incomes and those without access to an occupational scheme.