People retiring in 2018 'have highest income expectations in at least a decade'

People retiring this year have the highest typical expectations for their incomes in at least a decade, a report has found.

On average, those retiring in 2018 expect to have an income of £19,900 a year, the highest figure since research from Prudential started in 2008.

The "class of 2018" anticipates having an average income 10% higher than those who ended their working lives in 2017, whose average expected annual retirement income was £18,100.

Expected retirement incomes are now £1,200 higher than the £18,700 people retiring in 2008 were anticipating.

The report found expected retirement incomes have been on the increase each year since 2013, when they hit a low of £15,300.

A pensions revolution has taken place since Prudential first launched its research in 2008, with the launch of automatic enrolment into workplace pensions in 2012 and more recently the pension freedoms for over-55s, meaning people are no longer required to buy an annuity when they retire.

But "gold-plated" final salary pension schemes which promise a certain level of income have also become more scarce in recent years.

The research found that despite the anticipated income boost, nearly half (46%) of people planning to retire this year feel they are either not financially well prepared for retirement or are unsure about their preparations.

Meanwhile, only half (50%) believe their expected income will enable them to have comfortable retirement, while 27% believe they do not have enough money for retirement.

Vince Smith-Hughes, a retirement income expert at Prudential, said: "The new record high for expected retirement incomes is good news for people planning to retire this year, highlighting how saving for the future is paying off.

"The 10% rise from last year is even more impressive given the economic and political uncertainty that savers are having to cope with.

"That uncertainty is however impacting the confidence of nearly half of the class of 2018 who fear they aren't financially well equipped."

He continued: "The message remains the same for anyone looking to make their retirement as financially comfortable as possible - try to save as much as possible as early as possible in your working life."

Some 1,000 people planning to retire in 2018 were surveyed for the report.

Guy Opperman, minister for pensions and financial inclusion, said: "It's fantastic news that more and more people can look forward to a financially secure retirement.

Minister Guy Opperman
Minister Guy Opperman welcomed the news as "fantastic" (Chris McAndrew/UK Parliament/PA)

"But there is still more to do to ensure that everyone is building up good private pension savings, which is why we are increasing automatic enrolment contributions in April 2018 and April 2019 and have just announced a package of measures to ensure that even more people benefit from a workplace pension."

Here is how expected retirement incomes have changed since 2008, according to Prudential's research:

2008 - £18,700
2009 - £17,800
2010 - £16,500
2011 - £16,600
2012 - £15,500
2013 - £15,300
2014 - £15,800
2015 - £17,000
2016 - £17,700
2017 - £18,100
2018 - £19,900

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