One in five looking to retire will rely on state pension

Around 18 per cent of people who intend to give up work during 2010 admit they will be relying on the state pension and income from savings to fund their retirement, according to insurer Prudential.

Nearly a third of people who are about to retire either do not know how much they will receive from the state pension or over-estimate how much they will get by 25 a week or more.

The group warned that people planning to rely on the state pension for their sole income during retirement are likely to be in for a shock, as the basic state pension currently pays 95.25 a week to a single person and 152.30 to a married couple.

But the latest figures from the Office for National Statistics show that the average expenditure for a household headed by someone aged between 65 and 74 is 321 a week.

Martyn Bogira, director of defined contribution solutions at Prudential, said: "If the basic state pension is your only source of income you could be in an extremely precarious position financially.

"Just one significant financial emergency, like your central heating system unexpectedly breaking down, could cause serious financial hardship for people expecting to retire on the state pension alone."

The research found that across all people who are planning to retire this year, the state pension will account for an average of 34 per cent of their income.

Company pension schemes will make up 36 per cent of the average person's retirement income, with 11 per cent coming from other savings and investments and 9 per cent contributed by personal pensions.

On top of this around 6 per cent of people's income will come from part-time jobs, and around 1 per cent from equity release.