Retirement Income falls short for new pensioners

Pensioner are facing a 40% fall in their average income in retirement to £11,600 compared to an average working wage of £19,000 according to new research

The figures from HM Revenue & Customs show that most UK  workers can expect to see their incomes fall by more than a third and in some areas including the capital the drop could be as much as half their income.

Covering both full and part time employment, the figures from HMRC’s Survey of Personal Incomes 2010/11 show that those expecting to rely mainly on pension payouts in retirement could be in for ‘a nasty shock’.

MD of Retirement at financial firm Partnership Andrew Megson said;

“While people at retirement are likely to have fewer outgoings, it is still hard to imagine that anyone would not feel the pinch if they lost a third of their income overnight.  Even if their pension is topped up by income from savings and investments or part-time work it is still likely to be quite a shock.”

Other industry experts believe that most people significantly underestimated how long they would live in retirement and how much money they would need to live on.  Tom McPhail from Hargreaves Lansdown commented;

“Typically many people start too late, save too little and expect too much.  Linking projected post-retirement income to current earnings makes sense as it helps to plan the transition from work to retirement.”

He recommended that people make time to find out how much is being paid into their retirement savings and the kind of income it might produce when they retire.

Falling annuity rates have also been blamed for the reduction in income for pensioners who rely on defined contribution schemes to provide a regular payout in retirement.

Further research from Prudential has uncovered that more and more people are reaching retirement age in debt, stretching the reduced income they do have even further.  The data showed that almost 20% of those planning to retire this year have outstanding debts averaging £31,200.

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