Two industry surveys have revealed a significant retirement income gap between those retiring this year and the next generation of retirees.
UK Insurer Prudential, who carried out the surveys conducted within a few months of each other, found that there was a £3,000 gap between estimated retirement incomes.
In their June survey, Brits between the ages of 45 and 55 who are due to retire within the next 10 to 15 years, are expecting to retire on £14,000 a year, whereas the February survey found that those retiring in 2015 estimate their retirement income to be around £17,000.
27 per cent of respondents in the June survey believe the income will be enough to live on, compared to 50 per cent of those who will be retiring this year.
In addition, the latest Prudential research also showed:
- Just under half of respondents admitted to putting pension contributions on hold at some point
- 11 per cent took a ten year break from contributing to their pensions
- 20 per cent stopped making contributions between three and 10 years
Jason Cannon, Corporate Pensions Consultant at Aon Employee Benefits commented: “We are slowly seeing a smaller population of people - particularly in the private sector - who have levels of valuable employer-sponsored defined benefit schemes to fall back on. The trend towards defined contribution or money purchase schemes has resulted in pension benefits being comparably lower.”
But Vince Smith-Hughes, retirement income expert at Prudential said it was ‘surprising’ that there was reduced confidence in retirement income among the next generation of retirees. Their annual research has showed that retirement income expectations have been rising for the past few years, with 2015 retirees having the highest expected income of any group since the financial crisis.
He continued: “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. 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.”
Cannon added: “Whilst the introduction of auto enrolment has meant that millions more of the working population now have ongoing pension contributions from both themselves and their employers, people should be realistic about their likely retirement income.
“The cost of delay is hugely significant and whilst for the younger generation auto enrolment may help ensure people receive higher levels of relative income, it might not have the same impact for older generations.”
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