People looking to retire in the coming 12 months expect to receive an annual income of £17,700 – the third annual increase in a row, according to the latest research by Prudential.
Each year Prudential conducts research into the financial plans and aspirations of people planning to retire in the year ahead. This year’s retirees – the Class of 2016 – expect to be 4% better off than those who retired in 2015 and who expected on average to receive £17,000 a year.
The study is now in its ninth year and this year’s results are the first based on interviews exclusively with people who will retire under the new pension freedoms regime which came into force in April 2015. The research results suggest that the rule changes have resulted in an increase in confidence about the future among many retirees.
Prudential found that 56% of the Class of 2016 feel financially well-prepared for retirement, up slightly on the 54% from last year’s research.
However, despite the 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.
Vince Smith-Hughes, retirement spokesperson 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.”
The steady rise in average expected retirement incomes nationally masks some significant fluctuations at a regional level. People retiring in the South East of England are expecting annual incomes 25% higher than those in the region who retired last year. Meanwhile those in the North West and Eastern England are looking forward to rises in retirement income of 17% and 14% respectively.
However, those planning to retire in London in 2016 are expecting average incomes 22% lower than last year’s London retirees, while people in the West Midlands expect to be 16% worse off than those from the previous year.