Those retiring this year can expect to live on an average annual income of just £15,500, according to research from Prudential.
|Photo: IAN JONES|
By Kara Gammell
Expected retirement incomes have hit a five-year low, a fall of more than 15pc.
Those retiring this year can expect to live on an average annual income, including private, company and State pensions, of just £15,500, according to research from Prudential.
This is down from nearly £18,600 five years ago.
The survey revealed that fewer than two in five of those about to retire feel they have saved enough to secure a comfortable income, with just one in five expecting to live on less than £10,000 a year.
According to the report, men are more optimistic about their retirement than women, with 45pc of men confident they will be financially comfortable, compared with just 31pc of women.
Meanwhile, around the country there is a regional disparity of more than £5,000 in expected retirement income. Londoners have the highest average expected retirement incomes of £17,900, while those in Yorkshire and Humberside have the lowest at £12,800.
Tom McPhail, head of pensions research at Hargreaves Lansdown, warned that income levels are likely to decline further. Annuity rates, which determine, income from your pension, are at a record low.
“Investment funds are volatile, annuity rates are declining and employers are shutting down final salary pension schemes with almost unseemly haste,” he said.
However, for those who are planning on retiring this year, Mr McPhail pointed out that there is unlikely to be much gained by delaying.
“Delaying annuity purchase for one year at age 65 will take 22 years to make a financial difference and when you consider life expectancy at age 65 for a man this year is just under 21 years, there is very little to gain. What’s more, while Gilt yields could shoot up again and drive annuity rates to rise, it is more likely they will continue to decline.”
Mr McPhail said that for those looking to retire, it is essential to shop around for the best possible terms when it comes to buying an annuity.
“You can use drawdown as an alternative but only if you are happy with investment risk in retirement,” he said.
Vince Smith-Hughes, spokesman at Prudential, said: “The current economic climate has created the perfect storm for people in the run up to retirement. The impact of the credit crunch, banking crisis, recession, and concerns over the Eurozone, has been reflected in the fact that expected retirement income levels have hit a five-year-low.
“It is concerning that expected retirement incomes are going down, while pensioner expenditure is going up.”© Copyright of Telegraph Media Group Limited 2012
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