Retirees Expect £17k A Year Pension Income

People giving up work this year expect to have an annual retirement income of £17,000 – the highest level for more than six years.

Flexible access to pension funds and more consumer confidence in the economy are boosting pensions, according to financial firm The Prudential.

Their study shows average retirement incomes are up 8% from last year, giving retirees an extra £1,200 a year in the pockets and purses.

However, financial prospects in retirement depend on where many people leave.

Those in the north east saw expected incomes rise by 27%, but the lowest gain was in Scotland, where someone approaching retirement has a predicted retirement income 7% lower than those who retired last year.

Financial aspirations

Other regions with large increases in expected pensions include the south west (19%), the west midlands (18%) and London (17%).

The firm has quizzed those approaching retirement about the financial aspirations for six years.

In 2008, the hope for someone retiring this year was to have an income of  £18,700 a year, which means although the figure is rising, it is less than expected by many, says Prudential pensions expert Vince Smith-Hughes.

“The challenge for retirement savers is to have expectations in line with their financial resources,” he said.

“Media speculation about pension cash available after the new flexible access rules come into effect in April has raised those expectations. Regardless of this, people still have to plan their spending in retirement.”

Younger generations

Smith-Hughes also argues pensions are not only for the older generation to think about.

Pension minister Steve Webb has indicated today’s young workers in the 20s are looking towards building a comfortable pension in retirement.

“This is a wakeup call and shows the importance of saving just a little but often throughout your working life,” said Smith-Hughes.

“Many younger workers have an unrealistic expectation about how much money they will have when they retire and at what age they can access their cash.”

Webb has visited schools to find out what youngsters know about pensions – and as a result has ordered an online video channel covering saving for retirement should be switched on YouTube.

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