By Derek Baty

Last updated 17:28, Friday, 27 June 2008

With the average UK weekly wage at £457 it might be reasonable to expect a pensioner to have an income not far below that.

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You may be surprised to learn that the average income in retirement is £215 per week which, based upon a 40 hour working week, is less than the current minimum wage. Unsurprisingly the National Association of Pension Funds (NAPF) claimed that one third of Britons are set to be disappointed with their pension provisions when they reach retirement.

Mark Brooks, spokesperson for the NAPF, remarked that people are not only living longer, but expect a higher standard of living these days.

Both of these factors are only exacerbating the problem, he said: “Those who are not putting adequate money aside for their retirement pension will be disappointed when they become a pensioner but the earlier a person starts saving, the easier it will be.”

Mr Brooks claimed that a sufficient pension fund will be enough money to last someone at least 18 years without working.

The Government’s Actuary Department has predicted that by 2050, the average man will live to age 86 and the average woman to age 89.

Apart from the State Pension, the provision of income in our retirement comes from two sources – a defined benefit scheme or defined contribution.

Cutting through the technical jargon the differences between the two types of scheme become clearer. A defined benefit or final salary scheme is a promise by an employer to pay a pension based upon an employee’s final salary and his length of service, so someone with 40 years’ service with the same employer could expect to retire with a pension income of two thirds of their final salary.

However, in order to honour that promise the employer has to put aside a substantial sum of money and more and more employers are unwilling or unable to make such a financial commitment.

A defined contribution scheme provides no such promise and depends entirely on the amount of money built up in a fund over a number of years, with the average pension being approximately 37 per cent of final earnings.

With employers withdrawing access to final salary schemes in favour of defined contribution schemes the average pension income in the UK looks set to drop further. The state cannot afford to make good the shortfall and so the responsibility to provide a comfortable retirement increasingly falls to the individual. However, that may not be as easy as it sounds.

A recent study from Prudential showed that UK workers have nearly halved the amount they pay into private and company pension schemes in the last 12 months.

Increasing household bills, rising mortgage repayments and below inflation pay rises are affecting family finances.

Official statistics show record numbers of pensioners are working beyond state pension age.

The number has increased over the last 15 years by over 55 per cent to 1.3 million. So, unless you want to join them, take responsibility for your retirement planning and seek professional independent financial advice.

• For advice on retirement planning email moneymatters@armstrongwatson.co.uk or call freephone 0800 195 2161.