Average retirement income nears 2008 high

Average retirement income nears 2008 high

The average retirement income of someone retiring in 2017 is the highest it has been since 2008, and just short of the all-time peak of £18,700 a year.

According to research by Prudential, someone leaving the workforce this year can expect an annual retirement income of £18,100.

That was £400 more than those retiring in 2016 could expect.

It was also just £600 less than the all-time peak in 2008, before the financial crash wiped thousands off the average retirement income.

Average retirement income hit a low of £15,300 in 2013, but has steadily increased since then.

But despite this improvement, the Prudential research found nearly half (45 per cent) of the so-called "class of 2017" felt they were not financially well-prepared for retirement, or were unsure about their preparations.

Kirsty Anderson, a retirement income expert at Prudential, said, while the improvement would welcomed by everyone planning to retire this year, it was "striking" that expected income had still not returned to the 2008 level.

“After a decade of unprecedented changes to the rules around pensions, we are also seeing a degree of uncertainty from retirees about whether the amount they’ve saved will leave them financially prepared for the years ahead," she said.

She said this highlighted the need for financial advice.

"Today, as in 2008, the message for people looking to make their retirement as financially comfortable as possible should be to try to save as much as possible from as early as possible in their working lives."

Frances Kemp, an independent financial adviser with Nurture Financial Planning, put the increase in income expectations largely down to the fact that retirees were willing to take more investment risk.

She said this was an effect of pension freedoms, which scrapped compulsory annuitisation, allowing retirees more freedom to set their own retirement incomes.

"Clients are now actually focusing on their own benchmarks. And they understand that, to meet those, they need to invest."

She said this was a positive development, but stressed the need for it to be done in a "controlled environment" with a financial adviser.