15th January 2016
Those retiring this year expect to receive an annual income of £17,700 from their pensions, still below the level seen pre-financial crisis.
Research from Prudential reveals a 4% increase on the amount of income expected when compared to last year. However, when all pension pots, state pension and other investments are taken into account, people retiring this year are still expecting £1,000 less a year than those who retired at the start of 2008.
Over half, 56%, of retirees feel financially well-prepared, up from 54% last year. The pension freedoms introduced in April last year had led to increased confidence in retirees’ retirement futures.
Retirees may also feel better off as the pension freedoms allow them to keep their money invested through drawdown schemes rather than buy an annuity that provides a set level of income, often at a poor rate.
However, the problems in the stockmarket at the beginning of this year could also reduce confidence in these pension investments.
Not all retirees are equal, and those in the south-east expect their pension income to be £21,500 – an increase of 25% on last year. Londoners are expecting a pension income of £16,800, a reduction of 22%.
Londoners may be less optimistic about their retirement prospects as those living in the capital are more at risk of being affected by stockmarket trends, according to Vince Smith-Hughes, a retirement expert at Prudential.
Those living in the north-west saw income expectations rise 17% to £17,7000 and in the north-east income expectations rose 7% to £18,800.
The West Midlands saw expectations decrease 16% to £15,200 and in the east Midlands they fell 3% to £15,400.
Scottish retirees are expecting their income to be 3% higher at £17,100.
Speaking about the £17,700 average figure, Smith-Hughes said: ‘The third consecutive year of growth in expected retirement incomes is very welcome and underlines increasing confidence among retirees, possibly driven by the introduction of pension freedoms.
‘It is also good to see that more of the Class of 2016 feel financially well prepared for retirement. Pensioners are however still playing catch up with the expectations of those who retired before the financial crisis. The best way for anyone still in work looking to boost their retirement income is to save as much as possible as early as possible.
‘The pension freedoms have increased the options open to people approaching retirement and the greater choice makes professional financial advice even more valuable.’