Some 6 million over-50s in the UK do not have a private or company pension and will be forced to retire on a state pension alone.

The State of Retirement Report was compiled by the insurance company LV= and shows that there are currently 1.2 million pensioners who survive on just the basic state pension of just £5,890 a year. However, this number is set to swell to 6.25 million as many over-50s cut back on savings in the current economic climate.    

For those who do pay into a private pension fund, the average retirement income is £7,488, which combined with the minimum state pension of £5,587, means they only just receive more than the minimum wage income of £11,477.

The LV= findings report that 15% of people who have already retired—or are due to do so in the next 5 years—have had to dramatically cut back on their long term savings during the past year.  The average decrease on savings was £296 a month, which equals £3,552 a year.

Those who have private pensions have made the biggest savings cuts: an average of £523 a month.  Whereas those with public sector pensions have decreased their pension payments by an average of £164 a month over the last twelve months.

The report reveals that 37% of women over the age of 50 do not pay into any private pension plan, compared to 20% of men.

Head of Pensions for LV=, Ray Chinn, said: ‘It is worrying that so many people are saving little or nothing for their retirement, instead expecting to fall back on the state pension. If more people reflected on their pension as a ‘wage’ that they will potentially be relying on for over two decades, they might feel more inclined to plan ahead.’

According to the report, there has been a growing level of concern for savings over the past year, with 58% of people due to retire in the next 5 years worried about their retirement income.

Financial worries about the cost of food and bills, petrol, low interest rates, high inflation and the general economy in the UK have contributed to many over-50s revising their plans of when they can stop working.   More than 25% now expect to retire much later than they had hoped to.

The new pension reforms have proved very beneficial for women, as they see their average pension increase by £40 a week.

The latest changes to the retirement system in the UK means that mothers and carers who choose to stay at home and raise their families instead of pursuing a career will now be entitled to draw a full state pension for the first time.   

The Work and Pensions Secretary, Ian Duncan Smith, announced that for women who reach retirement age from 2015, the state will treat them as though they had worked their entire lives and they will be given a flat-rate pension of approximately £140 each week.  A move that will see them financially better off by around £2000 each year.

As things currently stand, those who haven’t worked for 30 year prior to the state pension age receive a reduced state pension—the more years they have been out of the workplace the lesser the pension entitlement.

In an interview with the Telegraph, Ian Duncan Smith said that the state second pension would be discontinued.  The change would mean that wealthier workers would lose out but the secretary insisted that the majority of workers would be better off and the whole pension system would be simpler to understand than the current one.

“Nobody understands how it works,” he said. “It acts as a major disincentive to save. It penalises women, just for doing the most important thing in the world, which is to make sure that their families [are cared for].”

The full details of the reforms to the pension system are to be published by the Government in the next few weeks.

Duncan Smith said: “This is hugely beneficial for women who have a broken record of employment. The really critical point is right now they don’t get recognised in the system. But under this system they could build up full points.

“So caring in itself will carry, for the first time ever, a value, and this will be of major benefit to women. Women will be the biggest single beneficiaries from this programme, massively.”

A spokesperson for the Department for Work and Pensions added that because the overall cost of the state pension won’t increase, changes will need to be made elsewhere to fund the changes.

“Our plans will radically simplify the state pension system and set it above the level of the means-test, providing a fair and sustainable foundation for pension saving for people of working age,” she added.

Currently, workers can decide whether to opt into the state second pension or not.  If they choose to opt in and pay national insurance contributions for 30 years they will receive a basic state pension of £107.45 on top of their second pension.

Employees who have a company or private pension can opt out of the state second pension, this means that they and their employers receive a discount on national insurance payments.  The money saved is invested into their pension schemes but under the new reforms this system would come to an end.

In the future everyone will qualify for a flat rate pension of £140 a week.  However, being able to opt out will no longer be allowed and higher earning employees could lose thousands of pounds of retirement income each year.

Private sector workers will need to save a staggering £250,000 to purchase a pension income equivalent to the national minimum wage which is £12,646 a year.  If they want to draw a pension that is the same as the national average earnings of £25,900 they will need to save more than half a million pounds.   

These figures were released by the Intergenerational Foundation (IF).  By using freedom of information requests it discovered that 78,000 former public sector workers currently received pensions of more than the national average wage, and 12,000 received more than £50,000 a year.  Of the 12,000, 75% worked as doctors and the information doesn’t include any private work or savings.

Although most public sector workers contribute to a pension scheme, the benefits are usually better than the employees contributions, so any deficit to the scheme will end up being funded by future generations—today’s schoolchildren.

The report covers of the taxpayers’ liability for any deficits to public sector pensions, stating: ‘Are Government Pensions Unfair on the Younger Generation?’  It claims that the debts total £1.2 trillion and amount to £45,000 for every home in Britain,

A spokesperson for IF said: “This demonstrates the true scale of pension apartheid in the UK with news that 88pc  of public sector workers are currently entitled to pensions related to their final salaries, which are typically the most generous type of pension, compared to just 10pc of workers in the private sector.”

In contrast, approximately 13 million workers in the private sector do not have a company or private pension.  According to the Pensions Policy Institute (PPI), of those who do, the average amount that they manage to save for their retirement is £24,330.

Due to the current low annuity rates, this equates to a pension of just £3,700 a year, while the average ex-public sector worker has a retirement income of more than double that at £7,000 a year.

Pensions have generally been thought of as a concern only for the retired or those in their late 50s and onwards, but the figures show that today’s schoolchildren will bear the brunt of the deficit.

Financial experts are urging savers to act quickly to avoid missing out on the best ISA investments.

This year a person can save up to £11,280 in ISA’s, half in a cash ISA and half in a stocks and shares ISA, and enjoy tax free returns.

With interest being at a record low, ISAs are the smart way to save in the current economic climate.   

At present, a cash ISA of £5,640 will earn you £197.40 tax free for the year at a 3.5% interest rate, but each month that you delay will cost you £16.45 in returns.  With many providers looking to cut or pull their best rates by the end of May a saver could potentially lose even more if they delay in setting up their ISA.

There are currently some good deals to be found:  Lloyds has a new 3 year fixed rate ISA that offers 3.55% or 3.85% for balances over £10,000. The bank’s 4 year deal is even better offering 3.6% and 3.9%.

Better yet is the deal that the Halifax is running, where the 3 year fixed rate is 4.25% and the 4 year fixed rate is 4.35%.

Santander allows customers to transfer in their ISA from other accounts and their current rates are available until May to new and existing customers.  It is currently offering a 2 year fixed rate of 4% and a 1 year fixed rate of 3.5%.

Most lenders offer easy-access ISAs at slightly lower interest rates.  For instance, Santander offers 3.3% on balances of £2,500 and the Nationwide’s Flexclusive ISA pays 4.25%.

Experts are also advising people to check the rates on their existing ISA accounts and look to transfer these to providers with higher interest rates.   However, it may be better for you to stick to one provider if you prefer to have all your money in one place as many of the deals do not allow transfers.

If you previously held an easy-access account that had a short-term bonus last year, it’s important to know when the bonus finishes so you can time your switch accordingly.

David Black from the analyst company, Defaqto, said: “If you’ve got an existing variable-rate cash ISA it is well worth reviewing to see if you can get a better deal elsewhere,”

“Also if you’ve got a maturing fixed-rate cash ISA do check the ‘go to’ rate because it may not be particularly impressive.” He continued.

The annual cost of long term care is expected to surge from £26,000 to £33,000 per person for more than a million people a year by 2025 as life expectancy in the UK increases.

As people live longer, the number needing long term care is likely to rise by 37% – from 840,000 a year today to 1.1 million in 2025, according to research by financial firm LV=.

The report also found that one in five families are expecting to fund long term care for a relative and 11.5 million homeowners will consider remortgaging their properties to fund the expense.

Most families (88%) agree they should contribute towards the costs of long term care, but believe the amount they pay should be capped at £14,000.

On average, someone stays in long term care for two years at a cost of around £52,000 – and that figure will rise as people live longer and costs increase.

The LV= predictions are based on current costs and do not consider inflation, which coukld add thousands to care bills.

Total spending on long term care in the UK today is £21.8 billion a year, which will jump to a predicted £37.9 billion in 2025.

The LV= report shows average wealth of over 55s, including assets such as investments, savings, property after mortgage, is £32,500, which means they would have to fund the entire cost of care from their own funds under current rules.

The government is expected to respond to long term care funding recommendations in the Dilnot Report in the coming weeks.

Commission chairman Andrew Dilnot suggested the payment cap should be set at £35,000 and only those with assets of more than £100,000 should pay their long term care costs.

The government has floated a proposed £50,000 contribution cap.

Vanessa Owen, head of equity release for LV= said: “The UK is facing an uncertain future on the funding of long term care. Low interest rates and living costs continually on the up, coupled with social care budgets being cut, creates a worrying financial backdrop for many, especially those in retirement.

“It is a real concern for people who have the burden of long term care costs approaching, as currently they could be faced with an open ended bill which makes it difficult to plan effectively to meet these costs.”

People are being advised to check their tax codes as they could be paying the wrong amount of tax.

It’s been estimated that 25% of UK taxpayers may have received the wrong bill. Research shows that higher-rate tax payers and pensioners are the most likely to be taxed incorrectly.    

Accountancy company, UHY Hacker Young, studied hundreds of pay as you earn (PAYE) tax codes that had been sent out to discover what percentage of them were wrong.

PAYE codes are used to work out how much income tax a person should pay on their salary or pensions.

It showed that approximately a quarters of all bills required adjustment and some anomalies had seen people pay thousands of pounds in income tax that they didn’t owe.

The research found that more than two thirds of pensioners who had been given incorrect bills had been overcharged.

A new computer system installed in 2009 has been blamed for a catalogue of errors in tax codes. The new system was brought in combine information for National Insurance payments and PAYE.

HMRC also added tax owed from savings and investments into the equation, which has caused errors such as people paying twice if they completed a self-assessment form.

The accountancy firm remarked that HMRC’s tax estimates for investments are “often highly inaccurate”.

Spokesperson for UHY Hacker Young, John Sheehan, said: “HMRC usually has all the information it needs on its systems, so has little excuse for making assumptions and getting it wrong.”

Financial experts are urging people to check that their tax code is the correct one, and not to assume that they have been sent accurate bills.

For those who draw from more than one pension; you should check that the all the tax due is paid.

Head of Taxation at the Association of Chartered Certified Accountants, Chas Roy-Chowdhury, warns: “The worst situation is if you are underpaying, as that will come back to bite you, but at the same time you don’t want to be out of pocket by paying too much tax.

“If in doubt, call HMRC and take time for them to go through each item on your coding until you understand and are satisfied. HMRC are very keen to extract exactly the correct amount of tax from you, but mistakes can happen.”

The HMRC responded by saying that it did not recognise any of the numbers cited in the report and assured people that the accuracy rate for PAYE codes stands at 98%.

This October the auto enrolment pension plan begins for approximately ten million employees, however, most of these are unaware of how the scheme actually works.

It is estimated that up to 70% of UK workers have not been properly briefed on the auto enrolment pensions, and many of them have absolutely no knowledge of the scheme.  

Auto enrolment begins on the 1^st of October this year for some the country’s largest organisations and is expected to be fully rolled out by 2017.  This initiative was brought in to increase the amount of people in the UK who save for their retirement.  All employees must be automatically enrolled into a pension scheme unless they opt out.

A survey by the insurance giants Aviva has found that 68% of people questioned were not clear about the changes.  They reported that the “consumer awareness gap” is a “critical challenge that will need to be overcome” if the scheme is to be a success.

In its ‘Working Lives’ report, the company said that only 43% of workers who were currently without a pension would remain in the scheme.   21% were still undecided as to whether to stay in the pension scheme or not.

The report, which surveyed 2,000 employees and 200 employers, went on to say that 37% of workers questioned would definitely opt out the scheme, and 33% of bosses felt that their staff would choose to opt out.

Spokesperson for Aviva, Graham Boffey said: “The simple fact is that people are not saving enough for their retirement. [But] when the first companies start to automatically enrol their employees in October we can’t expect an immediate step-change in how people save.”

The Aviva report mentioned that the automatic enrolment scheme would have cost implications for firms, the scale of which would depend upon the size of the company and how many employees chose to opt out.

The Government estimates that between two and four million workers will choose to leave the scheme, which would mean that between five and eight million people would become either first time savers for their retirement, or save more.

The findings also detail how benefits are viewed by both employers and their workforce.  The report shows that a third of bosses thought a pension scheme was a valuable benefit but only 16% of employees felt the same.  Whereas 36% of workers said that a yearly bonus was their most valued benefit.

More than half of the workers questions said that their workplace currently offers a company pension and 60% of those did not contribute towards it.  They cited lack of money, repayment of debt and other family obligations as reasons to not have a company pension.

A recent report has said that almost 50% of Britons over the age of 50 will need to continue working and saving for an extra 11 years beyond the state pension age if they want to keep up their standard of living.

The report was published by the Pensions Policy Institute and they are concerned that people who are not physically able to continue working past state pension age could be at a serious financial disadvantage.  

The report suggests that pensioners need at least £211 a week (or £303 for a couple) to maintain a minimal standard of living during their retirement.  85% of over-50s who are currently working have enough in their pension pots to reach this with their state and private pensions combined.

However, for many this minimal standard of living would mean a sharp downturn in the lifestyles they currently enjoy. To continue with the standard of living they are used to with approximately two-third of their current income, 5% would need to continue working and saving for another six years past the state pension age.

The research goes on to say that 45% would need to carry on working and saving for 11 years after the state pension age—when they would be 77 years old—to maintain their current lifestyle.

The institute stresses that those who suffer from ill health, or have to stop work to care for family members would end up with a much smaller retirement income and would have their standard of living seriously reduced.

Director of the Pensions Policy Institute, Niki Cleal, said: “This demonstrates that many people need to start saving more today, if they want to avoid having to work much longer than they planned and want to have an adequate retirement income in the future.”

Chief Executive of the National Association of Pension Funds (NAPF), Joanne Segars, said: “Many people in their 50s will be stunned by the prospect of working for another decade after they start getting their state pension. It is a huge ask.

“Those who are prepared to live on less in their retirement may still find they do not have enough savings, so will have to work longer.”

The Legal Services Board (LSB) has called for all professional will-writers to be regulated.

The advisory group, which oversees the legal industry in England and Wales, has found that 20% of wills have errors and in many cases names have been left off the paperwork.   

Currently anybody can set up a service offering will-writing, but the LSB wants the process to become regulated and for service providers to be subjected to inspections, such as spot checks, to ensure that wills were correct and that all communication between parties was efficient.

Examples of poorly written wills have been ones that have been cut and pasted but without the necessary changes being made, or ones where names haven’t been included in the paperwork.

Chief Executive of the LSB, Chris Kenny, did however stress that people should continue to be able to write their own wills, with do-it-yourself guides for those with simple estates.

The LSB want regulation to come into place to tackle what it calls “systematic problems”, which include unfair sales practices, deception and fraud.

The body is concerned that when thing go wrong with a badly written will, there is little or no redress for the families concerned.

Along with recommending regulation of the industry, it also advises that different types of services be allowed to operate.  These would range from general legal services to more specialist services.

Providers should also be up to date with all the latest changes and rules of will-writing to offer the best service to its clients.

Chairman of the LSB, David Edmonds said: “Making a will is something everyone should do. It is one of the most important actions that individuals take,”

He continued: “We all should have a high degree of confidence in those entrusted with the task of writing our wills, advising us on the most appropriate actions, and ensuring that our wishes are carried out.

“We found too many examples of providers – lawyers and will-writers alike – not listening to their clients or being sloppy in their work – meaning those taking the important step of writing a will were also, unfortunately, leaving problems to their beneficiaries.”

These recommendations by the LSB will go through consultation to be considered by the coalition, who is expected to make a decision on regulation by the end of this year.  If regulation is approved, it is hoped that it would be in place by 2014.

Regulation of will-writing for non-solicitors is already underway in Scotland, which comes into force later this year—solicitors are already regulated.  In Northern Ireland, do-it-yourself packs are available from solicitors.

Banking giants, HSBC, produced a survey in 2011 that found that 66% of parents questioned in the UK hadn’t made a will.

The survey questioned 17,000 people worldwide, and 1,000 in the UK.  It discovered that only Canada had a better record of will-making.

Adam Sampson, the legal ombudsman for England and Wales, published a report in 2011 which showed that most legal complaints were regarding conveyancing, family law and wills.

At present the legal ombudsman can only get involved in disputes involving qualified lawyers; so many issues with wills written by non-solicitors went unresolved.

Mr Sampson also called for regulation of the industry to protected clients.

Cash-strapped over 55s have stopped spending and are stashing their cash to make sure they have enough money set aside for retirement.

A comfortable and fun-filled retirement is more of a priority than spending, according to a survey by financial firm Prudential.

More than a third (36%) will spend on travelling the world, while 43% will make spending money on enjoying themselves a priority.

Charity giving and vanity spending, like buying anti-aging potions, are of little importance compared with saving, reported the survey.

Only 4% confessed they would spend anything on anti-aging treatments, and only 5% felt they could afford to give to charity.

Vince Smith-Hughes, retirement income expert at Prudential, said: “Today’s retirees are likely to spend longer in retirement than previous generations so it is encouraging to see that they understand the importance of saving money to ensure they can live comfortably.

“Saving shouldn’t be regarded as something that suddenly stops once you retire, and the current generation of retirees seems to be more aware of this than ever before.

“Saving as much money as possible, from as early an age as possible, is the best way to ensure you can afford a comfortable lifestyle in retirement.

“It’s not only about saving though – many retirees are determined to spend money on enjoying themselves and travelling the world, which seems a fair reward for all their hard work during their working lives.”

Meanwhile, research for National Savings & Investment revealed over 55s who fret about their finances rather than taking action are saving significantly less than those who manage their money.

Worriers set aside an average £53.47 a month, while planners save nearly double – £104.39.

NS&I Savings spokesman John Prout said: “People seem to be getting into a cycle of financial fret. Time is spent worrying instead of focusing on money management and finances suffer as a result, causing more stress.

“By planning and taking active steps, we can take more control of our money and work towards saving. So if you’re getting money worries, take some time out to review the situation and take action.”