Pensioners hoping to be on £20k a year will get ‘nasty shock’
WORKERS retiring this year on average expect a record-high pension of almost £20,000 annually, according to a report.
But experts warned that expectations might not be matched by reality for many, after a survey revealed more than a quarter of upcoming retirees admitted they do not have enough money saved for their old age.
And nearly half (46 per cent) feel they are either not financially well prepared for retirement or are unsure about their preparations.
Typically, those retiring in 2018 expect to have a pre-tax income of £19,900 a year, found research by pension giant Prudential.
That’s the most generous assumption for their incomes in at least a decade – £1,200 higher than the average £18,700 anticipated by people who retired in 2008.
Retirees expect an average income 10 per cent higher than those who ended their working lives in 2017, whose average expected annual retirement income was £18,100, according to the report.
But generous “gold-plated” final salary pension schemes which guarantee an inflation-proof income have become more scarce in recent years, experts pointed out.
Worry
Steve Wilkie, of retirement specialist Responsible Life, said: “A lot of people are in for a nasty shock when they discover that what they expected their income to be and what they actually have at their disposal are world’s apart.
“Typically, someone would need to have built up a £100,000 pot to have an income of around £5,000. But millions of people aren’t even close to a pot of that size.
“The problem persists that saving into a pension is still not a priority, particularly when the cost of living remains so high.
“It’s the classic ‘stick your head in the sand and worry about it another day’ syndrome.
“That attitude was fine when we had lovely final salary pension schemes, but very few exist any more.”
In the survey of 1,000 people planning to retire in 2018, only half believe their expected income will enable them to have a comfortable retirement while 27 per cent say they do not have enough money for retirement.
The Prudential report found expected retirement incomes have been on the increase since 2013, when they hit a low of £15,300.
Vince Smith-Hughes, a retirement income expert at the group, said the current economic and political uncertainty is “impacting the confidence of nearly half of the class of 2018 who fear they aren’t financially well equipped”.
He added: “The message remains the same for anyone looking to make their retirement as financially comfortable as possible – try to save as much as possible as early as possible in your working life.”
Earlier this week the Daily Express reported how millions of UK pensioners are reliant on a basic state pension of just £7,000 a year to pay the bills.
For the poorest pensioners, three in every £4 of their income now comes from the state pension, rising to almost nine in every £10 when other state benefits are included, said Age UK.