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Pensioners 'still playing catch-up' with pre-financial crisis expectations

Published 15/01/2016

People retiring this year expect to be around £1,000 a year worse off than those who planned to retire in 2008
People retiring this year expect to be around £1,000 a year worse off than those who planned to retire in 2008

People retiring in 2016 expect to be around £700 a year better off than those whose careers ended in 2015, a report has found.

On average, people retiring this year across the UK expect to receive an annual income of £17,700 - marking the third annual increase in a row - according to research from Prudential.

People retiring in 2015 typically expected to have £17,000 to live on. The figures are made up of how much money people think they will have coming in a year from all their pensions, including the state pension, as well as from any savings or investments.

Despite the increase, those retiring this year still expect to be around £1,000 a year worse off than those who planned to retire in 2008, when the typical expected income was £18,700.

The research also suggests that the new pension freedoms introduced in April 2015 have helped boost people's retirement confidence.

The freedoms give people aged 55 and over more flexibility to take their pension pot how they wish, rather than being required to buy a retirement income called an annuity.

Annuities have been controversial in recent years due to plunging rates and concerns that people are not shopping around to get the best deal.

The free Pension Wise service was launched alongside the reforms to offer guidance to people taking up the new freedoms.

Prudential found that more than half (56%) of people retiring in 2016 felt financially well-prepared for their retirement, up from 54% last year.

The research, carried out among 1,000 people planning to retire in 2016, also found significant regional variations - with London retirees' income expectations slipping back significantly compared to a year ago.

Retirees in London have an expected income of £16,800, 22% lower than people retiring in the capital in 2015.

People retiring in the South East of England in 2016 expected to have 25% more to live on than those who retired in the region last year, with an average anticipated annual income of £21,500 - the highest of any region in the survey this year.

People in Eastern England had the next highest expected annual retirement incomes in 2016, at £19,000, marking a 14% jump on last year.

Those in the North West of England expected to have 17% more than people retiring there in 2015, at £17,700.

In Scotland, the average expected retirement income was £17,100 among people planning to retire in 2016, edging up by 3% on a year ago.

Vince Smith-Hughes, a retirement expert at Prudential, 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 ...

"Pensioners are however still playing catch-up with the expectations of those who retired before the financial crisis."

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