People retiring this year say they have lower expectations for their income in retirement than those who left work last year.
This trend of picking up less from pensions has dropped continually over the past six years.
Pensions firm Prudential calculates retirees this year are expecting an average income of £15,300 – £200 down on what last year’s retirees expected.
This is nearly a fifth (18%) down on how much people expected to spend in retirement in 2008 – which adds up to around £65 a week or £3,400 lower.
A Prudential spokesman said: “The economic squeeze is still gripping those entering retirement as expected pensions fall to a new low.
Less spending power
“When you consider that rising inflation erodes a retirees spending power in real terms, then the trend is concerning.”
However, the spokesman pointed out that expections for retirement incomes have increased in some parts of the country – with those in Scotland, the North West, Yorkshire, South West and London all expecting slightly more than the people living in the same places who retired in 2012.
When people retired in 2008, they were expecting an income of £18,700 a year, but the spokesman pointed out, the fall in real terms is much higher than the slide in predicted income because inflation has seen prices increase by 14.7%.
To put that real terms, a person retiring last year would have needed an income of £21,400 a year just to match the buying power of the person who retired in 2008.
“People who are still working should be thinking now of saving more for their retirement. People should save as much as possible, as soon as possible,” said the spokesman.
High income
“By doing so they will be able to build up a decent pension pot which should give them an income, which should mean they enjoy a comfortable retirement.”
The firm also advises anyone approaching retirement should consult a financial advisor who can discuss the available financial options.
“However, when retiring, it’s always tempting to choose the financial product which brings the highest income, but this may not be the best option because it might not be the best value in the long-term,” said the spokesman.
“All pensions should be offering protection against the rise in living costs and help protect dependents from future risk.”
With rising prices and eroding pension pots it’s a situation that will leave many pensioners with little to live on which makes the decisions on what they do with their savings on retirement vital.
