2013 retirees to suffer low income
People planning to retire this year expect to be living off the lowest average incomes recorded in six years, an insurer has warned.
This year's retirees expect to have a typical annual income of £15,300, making them around £3,400 a year worse off than workers who retired in 2008, said Prudential.
The gap becomes much worse when taking into account the effects of inflation eating into people's budgets.
Someone who retired last year would have needed an annual income of £21,400 to have the same spending power as an average person who entered retirement in 2008 on a typical income of £18,700, said Prudential. But the average amount people retired on last year was £15,500, leaving them £5,900 worse off in real terms than workers who retired in 2008.
Across Britain there is a £5,700-a-year difference between the regions with the highest and the lowest anticipated incomes for people retiring this year. Londoners expect to retire on an annual income of around £18,200 this year, while retirees in the West Midlands have the lowest anticipated incomes, at £12,500.
Plunging annuity rates have wiped thousands of pounds off retirees' incomes in recent years, while pensioners have faced a perfect storm of high living costs and low returns on their savings.
Experts also warned that possible changes to the way the Retail Price Index (RPI) is worked out could lead to more people being forced to put their retirement on hold due to the squeeze on their incomes.
Tom McPhail, head of pensions research at financial services company Hargreaves Lansdown, said: "As a result of the economic downturn, living standards have stagnated across much of society but those approaching retirement have been particularly hard hit. Annuity rates have fallen by a third in just four years. For people approaching retirement, that is a huge blow to their expectations at a time when it is probably too late for them to do anything about it."
Hargreaves Lansdown said that a 65-year-old man with a £100,000 pension pot could have secured an annual income of £7,855 by buying an annuity in the summer of 2008 but if he was doing so in December 2012, that figure would have fallen to £5,338.
The Office for National Statistics has been consulting on changes to the RPI and the recommendations from this exercise will be announced on Thursday.