More retired households receive the bulk of their income from private pensions and annuities than state pensions, according to new figures from the Office for National Statistics (ONS).
In its Household Disposable Income and Inequality 2015 report, the ONS said the percentage of retired households receiving income from private pensions and annuities rose from 44.5% in 1977 to 79.6% in 2014 to 2015.
Until 1999 to 2000, the ONS says, the state pension was consistently the largest source of income for retired households.
The report said: "Overall, the proportion coming from cash benefits (including state pension) has fallen significantly, from 64.7% in 1977 to the current level of 47.1% - this has been mainly due to growth in the percentage of retired households receiving income from private pensions and annuities."
In 1977, the average income received by retired households from private pensions was GBP 1,600, accounting for 18 per cent of the gross income of this group.
By 2014 to 2015, retired households received on average GBP 10,300 from private pensions or annuities, equivalent to 43 per cent of their gross income.
Gareth Shaw, head of consumer affairs at Saga Investment Services, said the figures highlight the need for financial planning.
He said: "Our analysis shows private pensions and annuities generate an average income of GBP 10,250 per year for the average retiree.
"To achieve this level of income, a healthy 65-year-old would need to have saved GBP 181,000 into their pension pot to buy a level annuity, or GBP 287,000 if they wanted to increase their income each year by inflation with an index-linked annuity."
Research conducted by Saga, found that over 50s remain overwhelmingly reliant (96%) upon cash savings accounts for income, compared with investments.
Shaw added: "With interest rates remaining at record lows and diminishing returns on cash, it is hardly surprising their overall investment income has been dragged down.
"It is important this age group looks beyond cash and considers other forms of investment, such as Stocks and Shares ISAs, in order to make their money work harder for them well into retirement and ensure that they can cover the demands of retirement."
First published 03.03.2016
Lindsay.sharman@wilmingtonplc.com