Half of new pensioners who retire are too broke to stop working

Worrying about the bills: Many pensioners who retire return immediately to work while others get part-time jobs. Posed by model

One in two people who retire quickly realises that they cannot afford to stop working, alarming research reveals today.

The report warns that Britain’s new ‘retirees’ are too broke to quit their jobs, and find themselves forced into desperate measures.

Many return immediately to work, while others get a part-time job, or have to use their home as a cash machine.

This involves either downsizing to a smaller property, moving to a cheaper area, or taking out an equity release product which gives them money from their home.

The report, from pensions company Scottish Widows, paints a bleak picture of the life facing the country’s rapidly ageing population, who have now become a ‘part-tirement generation’.

In the poll of more than 2,000 adults, half of the retirees admitted they faced a funding gap when they finished work. And nearly a third discovered they ‘did not have enough money to enjoy their new free time to the full’.

One in ten said they had no choice but to get a part-time job to ‘make up their retirement funding shortfall’.

Ian Naismith, a savings expert at Scottish Widows, said: ‘Many people underestimate how much money they will need when they retire to have the lifestyle they are accustomed to.’

Official figures show the average worker aged 60 or above, who works full-time, earns an annual salary of £23,565.

By comparison, the State pension – if they qualify forthe full amount – is worth just £5,078 a year, or £97.65 a week.

The majority of private sector workers do not have a company pension, and have little or no savings or investments to fall back on.

The Government is urgently introducing changes to force all bosses to pay into a pension for their workers for the first time in a bid to eradicate this problem for future generations.

With people living longer, the need for a large retirement pot has never been greater. One in six people alive today in Britain will reach 100. If they retire at the age of 65, they will have 35 years in retirement, if they can afford not to work.

Mr Naismith said: ‘We recommend people save at least 12 per cent of their salary from the age of 30 into a pension pot to ensure they have enough income in retirement.’

But official figures show that the number of older people whose finances are in a mess is growing rapidly.

Pensioners are the fastest-growing age group of bankrupts in Britain, according to the Government’s Insolvency Service. The number of insolvent people in the 65-plus age group has increased six times in a decade – 50 per cent faster than other age groups.

Una Farrell, from the Consumer Credit Counselling Service, said: ‘Dealing with debt is particularly hard as you get older as you are likely to have limited opportunities to increase your income.’

The average debt for one of the charity’s clients over the age of 55 is £25,826, compared to £24,274 for all age groups.

But their average annual income is only £12,290, which is ‘significantly lower’ than the £17,316 for all age groups. As a result, many older people’s debts are twice as large as their income.