The figures come from Prudential’s Class of 2013 research which provides insights into the financial expectations of Britons planning to retire in the next 12 months.
According to the research, expected retirement incomes have fallen in four of the past five years, and are now £3,400 lower than they were in 2008, when a typical person entering retirement anticipated an annual income of £18,700.
Yet, the real-term fall in incomes is even higher due to rises in living costs. Since 2008, inflation has caused prices to rise by 14.7%. Someone who retired last year would therefore need an annual income of £21,400, to have the same buying power as an average person entering retirement in 2008.
Despite expected retirement incomes falling nationally overall, they actually increased in certain areas of the UK.
The most significant year-on-year increases were in Yorkshire & Humberside, where they increased by £600 to £13,400. Notable increases also occurred in the South West, where an average 2013 retiree’s estimate was £500 more than that of their 2012 counterpart – £15,600 compared with £15,100.
Scotland, the North West and London also saw increases in expected retirement incomes.
Vince Smith Hughes, retirement expert at Prudential, said: “People entering retirement this year are continuing to feel the squeeze as their expected incomes have fallen for the fourth time in five years, to a new low.
“The continuing trend is even more concerning, when you consider that rising inflation is eroding pensioners’ spending power in real-terms.
“Wherever possible people entering retirement should consult a financial adviser or retirement specialist, who will be able to talk them through all of the retirement income options available to them. It can be tempting to go for whatever product offers the highest initial income, but this might not be the best value in the long-run as it could leave dependents at risk, or fail to protect you against rising living costs.
“Those who are still working should think about saving as much as possible as early as possible to give themselves the best chance of building up a decent pension pot to help to ensure a comfortable retirement.”
