UK pension income in further decline

The Momentum UK Team 09 January 2013

Expected incomes for UK retirees has decreased further following a five year slump, a study from the Prudential has claimed.

The findings show that the national average received by UK retirees is in steady decline, with the decrease totaling an 18% reduction in retirement income since 2008.

With four out of the previous five years showing a reduction in expected rates, those reaching retirement in 2013 could expect an annual income of £15,300.

This figure is £200 down on the same study for the previous year and a further £3,400 on figures from 2008 when an average retirement income was closer to £18,700.

Buying Power

In addition to a reduction in income, the effect of inflation and increased living costs is furthering a loss in value on annuities. Since 2008 the study claims that inflation had forced living costs to rise by 14.7%. This goes against the 18% reduction in pension income from the same period.

The numbers show that someone retiring in 2012 would need £21,400 per year to have the same buying power as someone retiring in 2008. Instead a 2012 retiree would have received closer to £15,500 making someone £5,900 worse off every year.

Regional variations

However, despite the reduction in overall national average, some areas of the UK have experienced an increase on their 2012 figures. Yorkshire and Humberside for example experienced a £600 increase. The South West received a £500 increase to give a regional average of £15,100, whilst Scotland, North Wales and London also saw an increase in their expected retirement incomes.

Vince Smith Hughes, retirement expert at Prudential, said:

"People entering retirement this year are continuing to feel the squeeze as their expected incomes have fallen for the fourth time in five years, to a new low.

"The continuing trend is even more concerning, when you consider that rising inflation is eroding pensioners' spending power in real-terms.

"Those who are still working should think about saving as much as possible as early as possible, to give themselves the best chance of building up a decent pension pot to help to ensure a comfortable retirement."