Over 55s Expect To Retire On £15,800 A Year

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Retirement incomes expectations are on the up as the over 55s feel the economy is improving, according to a new report.

The average expectation for new retirees is an income of £15,800 a year – £500 up on a year ago, says financial firm The Prudential.

However, retirement income now is still well below the peak expectation of £18,700 a year in 2008.

Although those approaching retirement are hoping for more money, the national figure masks some significant regional variations, research by the firm reveals.

Out of 10 regions, three saw falling expectations and one remained unchanged.

Lower retirement income expectations derive from increasing inflation, which has added 20% to the cost of living since 2008.

Inflation hits spending power

To maintain the same spending power as those who retired in 2008, someone retiring this year would have to achieve a pension income of £22,400.

Vince Smith-Hughes, retirement expert at Prudential, said: “It’s good to see that people approaching retirement have more confidence about achieving a higher income than their counterparts in recent years.

“However, inflation is a real factor eating away at pension income, and it’s not necessarily the money coming in that determines how well-off someone is in retirement, but the where their money goes. Living costs as a fifth higher in real terms and that means less money buys a lot less as well.”

Meanwhile, annuity firm MGM Advantage claims millions of pensioners are scrimping on day-to-day essentials to save cash.

A study by the firm reports 41% of pensioners have cut their spending – with 27% turning down their heating and 23% reducing food shopping bills.

Slashing spending

Huge numbers have changed the way they shop as well.

According to the survey, a third have switched allegiance to discount stores rather than mainstream supermarkets, while 14% have shelved plans to buy a new car.

To slash travel expenses, 15% are more likely to catch a bus or train.

Another 13% have turned to selling on internet auction sites to raise some extra money.

Andrew Tully, pensions technical director, MGM Advantage said: “We are battling a cost of living crisis that is not improving despite falling inflation.

“Many pensioners on a fixed income are in difficult financial straits and are looking at ways to make some extra cash by selling on the internet. People should not have to be so careful with their food and heating bills in retirement. They are essentials not luxuries.”

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