Prudential 

Retirement incomes to hit 'record high'

Retirement incomes to hit 'record high'

This year’s retirees are projected to retire on the highest average amount on record, according to research.

Provider Prudential found retirees expect to be retiring on an average income of £19,900 a year in 2018.

This means they expect an income 10 per cent more than those who gave up work in 2017, whose average expected annual retirement income was £18,100.

The provider said this was predominantly due to to the prevailing bull market, which meant people had more money in their pension and Isa products.

Vince Smith-Hughes, retirement income expert at Prudential, said: "We think what has been happening is people are seeing money increase in their pensions and savings pots, which is what has made them [expect the higher incomes].

"We also wonder whether people are looking at the new state pension and are thinking that's giving them a higher income as well."

Auto-enrolment could also start to impact the figures in the future, he added.

Mr Smith-Hughes said the there was a danger people were overestimating their income from the state pension, which was introduced in 2016, as not everyone might be eligible for the full amount.

Nevertheless, he said the research was representative because of the large number of people polled.

Prudential had questioned 9.896 non-retired UK adults aged 45 plus, including 1,000 planning to retire in 2018, in the period between 29 November and 11 December 2017.

Prudential's research has tracked retirement trends for the past 10 years and has detected a gradual increase in expected income levels in the five consecutive years since 2013.

From 2008 to that point expected incomes had fallen from £18,700 to £15,300, now they are £1,200 greater than at the time of the financial crisis.

Mr Smith-Hughes said: “The new record high for expected retirement incomes is good news for people planning to retire this year highlighting how saving for the future is paying off."

CLASS OF

EXPECTED INCOME

2008

£18,700

2009

£17,800

2010

£16,500

2011

£16,600

2012

£15,500

2013

£15,300

2014

£15,800

2015

£17,000

2016

£17,700

2017

£18,100

2018

£19,900

The past decade has seen some of the biggest changes to pensions in generations as well as major political and economic upheavals and Prudential said there are signs uncertainty may be hitting confidence despite rising incomes.

It said despite the record increase, this year’s findings showed almost half (46 per cent) of people planning to retire felt they were either not financially well prepared for retirement or unsure about their preparations.

A mere half of people questioned (50 per cent) believed their expected income would enable them to have a comfortable retirement, while 27 per cent believed they did not have enough money for retirement.

Mr Smith-Hughes said: “That uncertainty is impacting the confidence of nearly half of the Class of 2018 who fear they aren’t financially well equipped.

“For many a consultation with a professional financial adviser, both when saving into a pension and considering the income options at retirement, could be a major help.”

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