£3.5 billion pensions shortfall expected as incomes drop

People retiring this year expect to be £1,270 a year worse off than people who gave up work in 2009 as expected income fell for the third year running, according to newly released research from Prudential.

The findings suggest that the UK's adults who are planning to retire in 2010 expect to receive £3.49 billion less in their pensions compared to those who retired in 2009.

People planning to retire this year are expecting average annual incomes of £16,509 compared to £17,779 in 2009 and £18,663 in 2008.  Expected incomes are 7 per cent lower than in 2009 and 11.5 per cent down on 2008, Prudential's Class of 2010 study shows.

Pragmatic about pensions
The Prudential study shows the effects the recession and stock market volatility has had on retirement saving and Andy Brown, director of investment funds at Prudential, believes the figures may suggest that people are becoming more realistic about the amount of money they will receive when they come to retire.

"The recession has clearly had a major impact on peoples' expectations of their pensions.  I think what we're seeing is the emergence of pragmatism following the credit crunch with people perhaps being more realistic about the anticipated size of their pensions, in the same way that many homeowners are now taking a more balanced view of the value of their property.

"The fact that people retiring this year expect to receive less in their pensions than people who have retired in the past two years should come as a reminder that putting money into a pension or other savings, and starting sooner rather than later, is the only real way of guaranteeing a decent income in retirement."

More people retiring on less money
The Prudential survey shows that 18 per cent of people retiring in 2010 expect to receive an income of less than £10,000 a year from their pensions and investments, up from 11 per cent in 2009 and 9 per cent in 2008.

Insufficient pension and savings
Many people planning to retire in 2010 are sceptical that their pensions and any savings would provide them with sufficient income to enjoy a comfortable retirement.

While just under two in five (39 per cent) said their pension and savings would give them a decent retirement income, just over three-in-five (61 per cent) were doubtful that they would have enough money to enjoy a comfortable life in retirement.

And when asked if they thought they were financially well prepared for retirement, fewer than half (47 per cent) responded positively.

Men and women
Since 2009, the annual pension men expect to receive has fallen by 3.5 per cent from £20,313 to £19,593 while women's has dropped by 10.9 per cent from £13,671 to £12,169.

But while men's anticipated annual pensions have fallen every year since 2008, women's are higher in 2010 than they were in 2008 when they expected to receive £11,291 a year.