Personal PensionAug 20 2014

Average retirement now lasts 20 years: Prudential

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People turning 65 this year can expect to average nearly 20 years in retirement, according to Office for National Statistics data, further reiterating the need to save adequately during a working life.

Earlier this year, Prudential’s Class of 2014 research identified that people retiring this year have an average expected retirement income of £15,800.

It estimated that someone qualifying for the full state pension will need a pension pot of approximately £121,000 to secure a total annual retirement income of £15,800 for 20 years, made up of a combination of income drawdown and the state pension.

However, as a 20 year retirement is now the average, many retirees may live for several years longer. If they live for 25 years after retiring, Prudential calculated that to get the same total annual income of £15,800 they will need an estimated pension pot of approximately £139,000. That figure rises to £154,000 for someone retiring this year and living another 30 years.

Vince Smith-Hughes, retirement income expert at Prudential, said: “These new figures underline the importance of making retirement income decisions that address the risk of outliving your savings.

“If retirees choose to draw income directly from their pension fund, they need to consider if it’s sustainable to take that level of income over an extended number of years.

“It is also important for people not to overestimate the value of the state pension as a fall back should they exhaust their retirement pot.

“When planning finances for life after work and especially securing a retirement income, a consultation with a professional financial adviser or retirement specialist can help people to make the most of their options.”