Those entering retirement in 2013 are likely to have seen their annual income be 18% lower than those who retired in 2008, based upon thefindings by Prudential’s Class of 2013.
Since 2008, four out of the last five years have seen a decline in the expected average income of pensioners. While people entering retirement in 2008 could expect an annual income of £18,700 per year, now the average income will be £15,300.
Experts fear that this has been, and will continue to be, exacerbated as the cost of living continues to rise alongside inflation. As well as their average annual income falling by 18%, inflation has made prices 14.7% higher than in 2008. To put this into context, someone who retired in 2012 would have needed an annual income of £21,400 in order to have the same spending power of someone who retired in 2008 on an income of £18,700. As the cost of living continues to rise, this could lead to more pensioners coming into financial difficulties. As pensioners struggle financially, those looking to raise funds for a property deposit may have difficulty. As a result, mortgages for over 60s may be an area of the mortgage market that could see a decline in business.
However, what the findings do show is that while the national average of retirement income has fallen, some areas of the UK have seen pensioners sporting greater incomes. While would-be-pensioners in Scotland, London and the North West will see minor increases; those in the region of Yorkshire & Humberside may have about £600 of additional income compared to 2012, and the South West annual income will be £15,600, compared to last year’s income of £15,100.
While these regions are seeing rises, the national average is still declining. Vince Smith Hughes of Prudential says people 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.’