Next generation of retirees expect lower pensions

Emma Woollacott
retirement savings jar coins money piggy bank clear
retirement savings jar coins money piggy bank clear

People approaching retirement are, for the first time, expecting to be worse off than the previous generation.

A new poll shows that people aged between 45 and 55 expect to work until they are 65, with a retirement income of £14,000 a year on average.

That's nearly a fifth less than the expectations of those planning to retire this year, who are looking forward to an average of £17,000 a year.

Just 27% of 45 to 55-year-olds believe their pension will fund what they consider to be a comfortable life in retirement - half as many as those planning to retire this year.

And seven in 10 told Prudential researchers that they expect to have a lower standard of living than people currently in retirement, while only six per cent expect their standard of living to be better.

"We know from the results of our annual research that retirement income expectations have been rising over the past few years," says Vince Smith-Hughes, a retirement income expert at Prudential.
"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."

Almost half of the next generation of retirees have put their pension contributions on hold at some point during their working life, with more than one in 10 taking a break that lasted more than ten years.

"For most people, starting pension contributions early and continuing these throughout their working life is the best way to achieve a comfortable standard of living in retirement," says Smith-Hughes.

"However, it's not too late for those in their 40s and 50s who are looking to top up their pension pots – for many people this is the time in life when earnings are at their highest, thus providing the best opportunities to save."

According to Prudential's calculations, a 45-year-old planning to work for another 20 years could start paying in £70 a month now to receive an extra £3,000 a year in retirement.

Contributing £250 a month would build up an extra pension pot of £143,409, boosting retirement income by £10,888 a year.

"When planning finances for life after work, consulting a professional financial adviser will be helpful for many people trying to stay on track for a comfortable retirement," says Smith-Hughes.

"Retirees should also remember the free guidance that is available from the new Pension Wise service for those taking benefits, which is designed to help clarify the multitude of choices now available to retirees."

Designing Pensions Fit to Last Old Age
Designing Pensions Fit to Last Old Age

Read more on AOL Money:

How to give your pension a last-minute boost

Millions may miss out on full state pension

£1 billion released under pension freedoms