Prudential study reveals retirees in 2014 expect an increase in income

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A study by Prudential has found retirees in 2014 expect a first rise in retirement income for three years with an average increase of £500 on last year.

New research by Prudential has revealed expected retirement incomes have increased for the first time in three years as optimism about economic recovery feeds through to this year's retirees.

The insurer's seventh annual 'Class of' study, which tracks the future plans and aspirations of people planning to retire in the next 12 months, found that those retiring in 2014 expect average incomes of £15,800 per year – £500 higher than the Class of 2013.

This is the first rise in three years and only the second rise since 2008 when Prudential began annually monitoring expected average retirement incomes. The one previous rise was a negligible increase of £100 back in 2011. The expected increase in 2014 will be a welcome boost to those currently looking into the key aspects of retirement planning, such as pensions and annuities.

The rise of just over 3 per cent in national average expected retirement incomes masks some significant regional variations across the country. In total, six of the 10 regions that Prudential reported on saw increases, with three showing declines and one unchanged.

However, expected retirement incomes are still £2,900 lower than they were for the Class of 2008, when a typical person entering retirement anticipated an annual income of £18,700. The real-term fall in incomes is even higher due to rises in living costs, as inflation has caused prices to rise by nearly 20 per cent since 2008. Someone retiring this year would therefore need an annual income of £22,400, to have the same buying power as the average Class of 2008 retiree.

Vince Smith-Hughes, retirement expert at Prudential, said: "It is encouraging to see expected average retirement incomes rise this year, and that could well be a sign of people’s increasing optimism about economic recovery. However, it is important to remember that inflation, which has seen prices rise by 20 per cent since 2008, is eroding pensioners’ spending power in real terms.

"Wherever possible, people entering retirement should consult a financial adviser or retirement specialist, who can talk them through the various retirement income solutions available. Protecting loved ones by setting up a joint-life annuity and considering the long-term impact of inflation on retirement income, should be high on many people's priorities.

"It can be tempting on retirement to take whatever product offers the highest initial income but this might not be the best solution in the long-run, as it could leave dependants at risk and fail to protect you against rising living costs.

"Those who are still working should think about saving as much as possible as early as possible, to give themselves the best chance of having a retirement fund that will help to ensure a comfortable retirement."

About Prudential:

Prudential plc is an international financial services group with significant operations in Asia, the US and the UK. Prudential serves more than 23 million customers and have £427 billion of assets under management. The company is listed on stock exchanges in London, Hong Kong, Singapore and New York.

Prudential UK is a leading life and pensions provider with approximately 7 million customers.

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Celine Plum
Prudential UK
020 7004 8009
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Darragh Leeson
Prudential UK
020 7004 8081
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