Expected retirement incomes hit five-year low
People retiring in 2012 expect to live on an average annual income of £15,500 - over £1,000 a year less (six per cent) than those who retired in 2011. The figures come from Prudential's unique Class of 2012 research which provides insights into the financial expectations of Britons planning to retire in the next 12 months.
The results of Prudential's annual survey, first carried out in 2008, show that expected annual retirement incomes have dropped by more than 16 per cent in the last five years. The Class of 2008 retirees 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.
In a sign of the ongoing financial challenges facing those due to retire in 2012, one in five will get by on an expected annual income of less than £10,000. Meanwhile, around the country there is a regional disparity of more than £5,000 in expected retirement income. Londoners have the highest average expected incomes of £17,900, while those in Yorkshire and Humberside have the lowest at £12,800.
Fewer than two in five (37 per cent) of the Class of 2012 say that they have saved enough to secure a comfortable retirement.
Men are more optimistic about their retirement than women, with 45 per cent of men confident they will be financially comfortable compared with 31 per cent of women. However, nearly one in five (18 per cent) of those planning to retire in 2012 have no idea of the level of income they will need in order to live comfortably.
Vince Smith-Hughes, Prudential's retirement income expert, said: "The current economic climate has created the perfect storm for people in the run up to retirement. 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 longer that savings are invested in a retirement pot, the greater the opportunity they will have to grow.
"However, even those due to retire this year could make their retirement funds generate better incomes. Consulting a professional financial adviser can help savers to make more informed pension saving and retirement income decisions."