Expected retirement income hits a six-year high
14 January 2015
- Prudential’s Class of 2015 retirement research shows increase in average expected UK retirement income to £17,000 a year – eight per cent increase on 2014
- Wide regional disparities in changes in retirement income expectations – from a 27 per cent increase in the North East of England to a seven per cent fall in Scotland
- UK average expected annual retirement income is still £1,700 below its peak in 2008
Expected retirement incomes have hit a six-year high with people planning to retire this year – the Class of 2015 – expecting to be nearly eight per cent better off than those who stopped working in 2014, according to new research from Prudential.1
As the changes to pensions and saving regulations start to take effect and confidence in the economy continues to grow, the insurer’s research has found that those planning to retire in 2015 have an average expected annual retirement income of £17,000 per year2 – on average more than £1,200 higher than last year’s retirees. The figures come from Prudential’s eighth annual ‘Class of’ study, which tracks the future plans and aspirations of people planning to retire in the next 12 months.
The figures paint a picture of significant regional variation in retirement expectations for the Class of 2015, although there is an increase in expected retirement incomes in all but two of the regions Prudential reports on.
The North East of England saw expected incomes increase by more than a quarter (27 percent), with large increases also seen in the South West of England (19 per cent), the West Midlands (18 per cent) and London (17 per cent). Meanwhile, those planning to retire in
Scotland in 2015 expect an income that is seven per cent lower on average than those who retired last year.
Despite the increased optimism among the Class of 2015, expected retirement incomes are still £1,700 a year lower than the £18,700 expected by the Class of 2008, and £800 a year lower than the £17,800 income expected by the last of the pre-financial crash retirees in 2009.
Vince Smith-Hughes, retirement expert at Prudential, said: “Some of the increase in expectations we’re seeing could be attributed to the media coverage over recent months on the changes in the pension rules that will come into effect from April 2015. The challenge for providers and advisers is to help these pensioners to plan properly in order to benefit from the new freedoms and secure the best retirement income arrangement to suit their needs.
“The rule changes don’t alter the basic principle of needing to secure an income that will last throughout retirement. The best way to secure this is for people to save as much as possible as early as possible in their working lives. Consulting a financial adviser or retirement specialist well before giving up work can help savers to manage their retirement income expectations appropriately.
“It is encouraging that as economic confidence returns, our research continues to show a welcome upward trend in expected retirement incomes since the low point of two years ago. This is only the third time since we started researching retiree attitudes back in 2008 that we have seen income expectations rise.”
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