Pensions 'Plunge Over £3,000 In Five Years'
People planning to retire this year expect to be living off the lowest average incomes recorded in six years, it is claimed.
This year's retirees expect to have a typical annual income of £15,300, making them around £3,400 a year worse off than workers who retired in 2008, according to the Prudential.
The gap becomes much worse when taking into account the effects of inflation's erosion of people's household budgets.
Someone who retired last year would have needed an annual income of £21,400 to have the same spending power as an average person who entered retirement in 2008 on a typical income of £18,700, the Prudential said.
However, the average amount private employees retired on last year was £15,500, leaving them £5,900 worse off in real terms than workers who retired in 2008.
Across Britain there is also a £5,700-a-year difference between the regions with the highest and the lowest anticipated incomes for people retiring this year.
Londoners expect to retire on an annual income of around £18,200 this year, while retirees in the West Midlands have the lowest anticipated incomes, at £12,500.
Post-financial crash, annuity rates have dropped 33% and wiped thousands of pounds off retirees' incomes in recent years, while pensioners have faced a perfect storm of high living costs and low returns on their savings.
Experts also warned that possible changes to the way that Retail Price Index (RPI) is worked out could lead to more people being forced to put their retirement on hold due to the squeeze on their incomes.
Tom McPhail, head of pensions research at financial services company Hargreaves Lansdown, said: "For people approaching retirement, that is a huge blow to their expectations at a time when it is probably too late for them to do anything about it."
Hargreaves Lansdown said that a 65-year-old man with a £100,000 pension pot could have secured an annual income of £7,855 by buying an annuity in the summer of 2008 but if he was doing so in December 2012, that figure would have fallen to £5,338.
Quantitative easing (QE) has been blamed for pushing down annuity rates which set the size of someone's retirement income for life.
QE makes it cheaper for companies to borrow by pushing down the yield on government bonds, but annuity incomes are also based on these yields, meaning that new pensioners see their incomes reduced.
The Office for National Statistics has also been consulting on changes to the RPI and the recommendations from this will be announced on Thursday.
This trend downward is set to continue as baby boomers pass the age of 65, with 55% of 55 to 64-year-olds drawing a salary, compared with 41% in February 2010, Aviva has said.
what do you think?
Everything going according to the Bilderburg plan. All the more for our Non European hangers on.
Windows Live User
What..... "Londoners expect to retire on an annual income of around £18,200 this year, while retirees in the West Midlands have the lowest anticipated incomes, at £12,500". 12.5k Far too much, reduce their benefits immediately. Ironic isnt it
Can't be that important when this site thinks a balloon crashing is worth a higher place in it's headlines. Tory pressure or just media BA interns?
And once you are retired and of no further use to the government, if you end up in hospital you face been put on the Liverpool Care Pathway. The government is paying hospitals for meeting their target figure for removing "bed bllockers".
Doesnt stop the government from taxing this years retirees more from April and looking into ways of stopping their fuel allowance. Ive yet to hear an explanation from the coalition as to why overseas aid is ring fenced from any cuts while everyone in this country is being squeezed its a question that needs to be asked more forcably.
I quite agree Nigel. Any private individual or business who borrowed money, paid interest on it, and then gave it away would be rightly branded as a lunatic! This, however, is exactly what our goverment is doing because Camerloon is scared of the Tories being known as the 'nasty' party!
Now that the Government has divided the country into North v South, Public Sector v Private Sector, In work v Out of work they complete the set with Pensioners v Pensioners. Two different tax allowances from April and two seperates State Pension rates in the pipeline. Divide and conquer
Strange ! you have missed the most obvious.
Like those divisions weren't there long before this government ! The item goes back to 2008, now let me think who was in power then ?....oh yes brown, so by your logic he started the divide and rule thing yes ?
My pension fell 2500 pounds between 2007 and 2010 under browns useless leadership. He even stole some from the pensions pot and gave it to Africa ! brown and balls.................divide and conquer.
Mine too t.bulgin..... I still curse Brown
And so do I...I have had to start taking my private pension now to avoid losing any more of its value. Robber Brown, quatative easing and EU equality rules have all conspired to wreck the finest system in the world.
F.T. statement. For every pound saved by low/no interest 3 pounds is lost on savings and pension `s. Quantitative easing is all so devaluing the economy.The winners yes you guest right the Bankers.