The next generation of retirees, those aged 45-to-55 years old, expect to be worse off in retirement by a fifth (18%) compared to those leaving the workplace in 2015, according to research by insurer Prudential.
Its research, which surveyed more than 1,000 people, found that respondents in the 45-to-55 age group expect to work until they are 65 and estimate that their average annual retirement income will be £14,000.
In contrast, Prudential’s ‘Class of 2015’ study, published in February, found that those planning to retire this year expected an average annual income of £17,000, which leaves a generation gap in retirement income of £3,000 a year.
However, its research found that 27% of respondents, aged 45 to 55, believe their pension will provide them with sufficient income, compared to half (50%) of those planning to retire this year.
Just under three-quarters (70%) also expect to have a lower standard of living than people currently in retirement.
The research also found:
- 49% of respondents have put pension contributions on hold at some point during their working life.
- 11% have taken a break in contributions that lasted more than a decade.
- 20% stopped making contributions for between three and 10 years.
Vince Smith-Hughes, retirement income expert at Prudential, said: “We know from the results of our annual research that retirement income expectations have been rising over the past few years.
“In fact, 2015’s retirees have the highest expected retirement income of any group since the financial crisis, so it’s surprising to see reduced confidence among the next generation of retirees.
“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.
“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.
“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.”