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Expected retirement incomes rise for third year in a row

Paloma Kubiak
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Paloma Kubiak

People planning to retire over the next year expect to receive an annual income of £17,700 – the third annual increase in a row – according to a new study.

Research from Prudential which asked people planning to retire in the upcoming year about their financial aspirations shows they expect to be 4% better off than those who retired in 2015, with an average annual income of £17,000.

The ‘Class of 2016’ study reveals a year-on-year increase for the third time which suggests that there’s an increase in confidence among many retirees, especially in light of the new pension freedoms which came into force in April 2015.

Prudential also found that 56% of the ‘Class of 2016’ feel financially well-prepared for retirement – up slightly on the 54% from last year’s research.

However, despite the increase in retirement expectations, the figures have yet to return to their pre-financial crisis levels as the Class of 2016 expect to live on £1,000 less a year compared with those who planned to retire in 2008.

Huge variations at a regional level

Geographically, those retiring in south east England are expecting annual incomes 25% higher than those in the region who retired last year.

And in the north west and east of England, retirees are looking forward to rises in retirement income of 17% and 14%.

However, for those planning to retire in London in 2016, they expect average incomes to be 22% lower than the figures quoted last year while those in the West Midlands expect to be 16% worse off than their 2015 counterparts.

See below for the expected retirement incomes across the UK:

YM ExpectedRetirementTable1

‘Save as much as possible as early as possible’

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. 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. People should make the most of the Government’s free and impartial Pension Wise service and many who are considering their retirement options should also be seeking professional advice.”