The retirement expectation gap
The findings indicate workers of all age groups are confident they will be able to afford to retire significantly earlier than their respective State Pension ages.
Anyone born after 5 April 1978 will have to wait until their 68th birthday before they can start to claim the State Pension. However, under-35s expect to retire before they are 64 on average. The trend of estimating retirement dates at least four years short of the State Pension age is also visible among both the 35-54 and 55+ age groups.
For people currently aged 35 to 54, their State Pension age will be between 66 and 68 depending on when they were born. On average, they estimate they’ll retire before their 63rd birthday. For those aged 55+, the State Pension age is up to 66 years and seven months, but on average they expect to have retired before they reach 62 years of age.
|Age group||Average Expected Retirement Age||State Pension age|
|Under 35s||63 years and 9 months||68 years|
|35 to 54||62 years and 6 months||Between 66 and 68 years|
|55+||61 years and 8 months||Up to 66 and seven months|
|2015 retirees||60 years||66|
Many younger people feel they will be able to retire before the State Pension age, which can perhaps be explained by the fact that they estimate retirement income significantly higher than that expected by 2015 retirees.
Prudential data highlights the average person planning to retire in 2015 expects to have an annual retirement income of £17,000 – 45 per cent of whom will receive their income from a defined benefit (or ‘final salary’) pension scheme, down from 52 per cent in 2008.
Despite the proportion of people benefiting from generous final salary schemes falling, those aged 55+ in work expect an average annual retirement income of £19,400, 35-54 years olds expect £19,600 and the under 35s expect £21,400.
|Age group||Expected Annual Retirement Income|
|35 to 54||£19,600|
Stan Russell, retirement income expert at Prudential, said: “It is important not to underestimate quite how long retirement savings will need to last. Our previous research has shown the average retiree in 2015 is 60 years old, but I often encourage people born in the 1970s and 80s to be prepared for the fact that they are likely to be working in some form or other until they are much older.”
“Many people look forward to giving up work and doing more of the things they enjoy. However, in a world where fewer people will benefit from generous final salary pensions, and everyone will have to wait longer to receive the State Pension, making plans based on any false financial expectations may lead to problems later in life.
“Regular consultations with a professional financial adviser should help most people set realistic retirement income goals and help achieve them. For people in work the simple approach of saving as much as possible as early as possible is the best way of securing a comfortable retirement.”