19th June 2015
The next generation of retirees will retire on less than the current crop of pensioners.
Those aged between 45 and 55 expect to work until they are 65 and that their annual income in retirement will be around £14,000 a year, compared to this year’s retirees who can expect an income of £17,000 a year.
Research by Prudential shows that just 27% of those aged 45 to 55 believe their pension will provide them with sufficient income to enjoy what they believe is a comfortable retirement, compared to 50% of those leaving the workforce this year.
The generation gap in retirement income comes as no surprise to the younger cohort, with seven in 10 of 45 to 55 years olds saying they expect to have a lower standard of living than people currently in retirement, and just 6% expect their standard of living to be better.
One of the reasons for the income gap could be due to the fact that half of the next generation of retirees have put their contributions on hold at some point during their working like and one in 10 have taken a break that lasted more than a decade.
Another 20% have stopped making contributions for between three and 10 years.
Vince Smith-Hughes, retirement income expert at Prudential, said: ‘WE know from the results of our annual research that retirement income expectations have been rising over the past few years.
‘In fact, 2015’s retirees have the highest expected retirement incomes of any group since the financial crisis, so it’s surprising to see reduced confidence among the next generation of retirees.’
Smith-Hughes said starting contributions early and continuing consistently throughout working life is the ‘best way to achieve a comfortable standard of living in retirement’.
‘However, it is not too late for those in their 40s and 50s who are looking to top up their pension pots,’ he said. ‘For many people this is the time in life when earnings are at their highest, this providing the best opportunities to save.’