Annuity rates fall by 8% in 2011 hitting retirement incomes

Wednesday, 11 January 2012 08:34

The amount of money pensioners expect to live on during retirement has hit a five-year low thanks to rising living costs and the global economic downturn.

Prudential's Class of 2012 study found that the average Briton believes they will see a retirement income of £15,500 a year, 16 per cent or £3,100 less than the amount recorded in 2008.

Fewer than two in five people expect to be financially comfortable when they are no longer working, but one in five thinks they will have less than £10,000 to spend per annum.

Falling annuity rates have hit the level of income retirees can purchase with a lump sum saved through a private pension. Annuity rates fell by eight per cent in 2011, their fourth consecutive annual fall.

Some regional variation was witnessed in the study, with Londoners suggesting they may have £17,900 a year upon retirement, higher than the £12,800 reported by people in Yorkshire and Humberside.

Although men were more optimistic than women about being comfortable during retirement, the fact that 18 per cent of survey respondents had no idea how much money they would need to achieve this suggests some are adopting a wait-and-see approach.

Prudential spokesperson Vince Smith-Hughes said: "The current economic climate has created the perfect storm for people in the run up to retirement … It is concerning that expected retirement incomes are going down, while pensioner expenditure is going up."

He urged Britons to start saving into a pension as soon as possible.  Last month, Aviva's Real Retirement Report found that 37 per cent of over-55s have yet to make any concrete plans to cover their spending in later life.

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