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Expected retirement income hits five year low

Expected retirement income hits five year low

Category: Retirement

Updated: 11/01/2012
First Published: 11/01/2012

This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

People preparing to retire in 2012 expect to have to live on less money than retirees from previous years.

The Class of 2012 expect to live on an average annual income of £15,500 - over £1,000 a year less (6%) than those who retired in 2011, figures from Prudential show.

Over the longer-term, the trend shows large scale falls in retirement income.

Retirement incomes have dropped by more than 16% in the last five years.

Those taking their retirement in 2008 looked forward to a total annual income, including private, company and State pensions, of approximately £18,600 - £3,100 a year more than those planning to retire this year.

And a hard up one in five people expect to have to get by on less than £10,000 a year in their retirement, although there are differences from region-to-region.

Londoners have the highest average expected incomes of £17,900, while those in Yorkshire and Humberside have the lowest at £12,800.

In the battle of the sexes men are more optimistic about their retirement than women, with 45% of men confident they will be financially comfortable compared with 31% of women.

"The current economic climate has created the perfect storm for people in the run up to retirement," said Vince Smith Hughes, retirement income expert at Prudential.

"The impact of the credit crunch, banking crisis, recession, and concerns over the Eurozone, has been reflected in the fact that expected retirement income levels have hit a five-year-low.

"It is concerning that expected retirement incomes are going down, while pensioner expenditure is going up.

"However, there are some practical steps that workers and imminent retirees can take to ensure a more comfortable retirement. For those who are still working, it has never been a more important time to save into a pension."

The findings come just after research from Investment Life and Pensions revealed that 2011 was another bad year for annuity rates.

Rates fell for a fourth year in succession, with the average income generated by a standard level without guarantee annuity falling by 8.4% for a 65-year-old male and 7.7% for an equivalent female.

This was a sharper reduction than in 2010 when the average standard annuity rate for both a male and female fell by 2.7%.

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