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Expected UK retirement income up for third year in a row

Those in the UK planning to retire in the next 12 months expect to receive an annual income that is 4% higher than their peers who planned to retire in 2015, according to Prudential.

Expected UK retirement income up for third year in a row

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This year’s retirees, the ‘Class of 2016’, expect to receive an average £17,700 ($25,495, €23,425) each year, compared with £17,000 last year.

Now in its ninth year, the Prudential research suggests that the pension rules changes have resulted in greater confidence about the future among many retirees.

Financially prepared

More than half (56%) of the Class of 2016 feel financially well-prepared for retirement, up from 54% last year.

However, despite increases in retirement expectations over recent years, average expected annual retirement incomes have still not returned to pre financial crisis levels. The Class of 2016 expect to live on £1,000 a year less than their counterparts who planned to retire in 2008.

Increasing confidence

Vince Smith-Hughes, a retirement expert at Prudential, said: “The third consecutive year of growth in expected retirement incomes is very welcome and underlines increasing confidence among retirees, possibly driven by the introduction of pension freedoms. It is also good to see that more of the Class of 2016 feel financially well prepared for retirement.

“Pensioners are however still playing catch up with the expectations of those who retired before the financial crisis. The best way for anyone still in work looking to boost their retirement income is to save as much as possible as early as possible.

“The pension freedoms have increased the options open to people approaching retirement and the greater choice makes professional financial advice even more valuable. People should make the most of the Government’s free and impartial Pension Wise service and many who are considering their retirement options should also be seeking professional advice,” he said.

Regional differences

The steady rise in average expected retirement incomes nationally masks some significant fluctuations at a regional level. People retiring in the southeast of England are expecting annual incomes 25% higher than those in the region who retired last year.

Meanwhile, those in the northwest and eastern England are looking forward to increases in retirement income of 17% and 14%, respectively.

London lagging

However, it’s not all good news as those planning to retire in London in 2016 are expecting average incomes 22% lower than last years’ London retirees, while people in the West Midlands expect to be 16% worse off than those from the previous year.

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