People who retired in 2016 receive an income of nearly £18k a year – still £1k less than before the financial crisis.
People retiring this year expect their pension savings and investments to produce an annual income of £17,700, new research from Prudential reveals.
That’s a modest 4 per cent increase on the amount people who stopped work last year hoped to retire on – taking into account all their pension pots, the state pension and other investments they may have.
But it still undershoots the £18,700 a year retirees expected to get at the start of 2008, before the financial crisis fully hit home and low interest rates slashed annuity and savings income. After all when you were receiving up to 6% in interest on your savings, it was better, now we are lucky to receive any at all!
Below is the Prudential’s full 2008-2016 Retirement Income Results, it makes interesting reading, for those looking to retire without a private pension.
Some 56 per cent of those about to retire feel financial well-prepared for it, a slight increase on 54 per cent recorded in Prudential’s survey last year.
The insurance giant reckons that pension freedom reforms last April have led to an increase in confidence about the future among retirees. Over-55s now have full control over their pension pots to spend, save or invest them as they wish.
Retirees might feel richer because many more are leaving their money invested in income drawdown schemes, rather than spending their entire retirement savings upfront on annuities which provide an income for life but are considered poor value and restrictive.
Annuity rates fell to record lows last year, hitting the worst level ever in April – 10 days after pension freedom – according to research released by comparison website Money Facts.
That said, Prudential’s survey was carried out at end of 2015, so people thinking of generating a retirement income from money left invested might be feeling far less confident about future returns following the turmoil on financial markets due to Brexit and Trump last year.
Meanwhile, Prudential’s ‘Class of 2016’ retirement research revealed some big changes and disparities in income expectations between regions over the past year. See the table below.
For example, retirees in the south east believe their pension savings and investments will produce an income of £21,500, up 25 per cent on the year before, whereas Londoners put the figure at £16,800, down 22 per cent on a year ago.
This volatility could be because people living in the capital are more affected by stock market trends.
Other notable regional findings were a 17 per cent rise in annual income expectations to £17,700 in the north west, against a 7 per cent rise to £18,800 in the north east. The West Midlands saw a 16 per cent decline to £15,200 compared to a 3 per cent fall to £15,400 in the East Midlands.
Scottish retirees reported a 3 per cent rise in anticipated annual income to £17,100. The Northern Ireland and Wales samples were too small to include separately from the overall average.
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.
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As with everything financial, I am not a financial advisor therefore 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.