Outlook a little rosier for retirement income prospects
People retiring in 2014 are anticipating an average income of £15,800 - around £500 higher than those who retired last year, according to the Prudential's 'Class of 2014' study.
This is the first rise in expected income in three years, and the only significant one since 2008, when the Prudential's annual survey began.
There's similarly positive news from the Department for Work and Pensions (DWP), whose latest figures on pensioner incomes indicate that retirees as a whole have seen modest growth in real income over the three years to 2013.
Moreover, average pensioner income has been growing markedly faster than that of the UK as a whole, up by 37% compared with 12% for the wider population since 1998/99.
But the Pru's research shows that expected retirement incomes are still £2,900 lower than for those who retired in 2008; and that gap is exacerbated by the impact of inflation, which has pushed prices up by almost 20% over that six-year period.
As a consequence, the study estimates that today's retirees need a real income of £22,400 to have the same purchasing power as those of 2008.
Moreover, the headline figures mask considerable disparities within the group. 14% of retirees - one in seven - have made no pension provision at all.
The Pru figures suggest 18% of those retiring in 2014 will have an income below the minimum income standard of £8,600 for a single pensioner set by the Joseph Rowntree Foundation.
Both the Pru and the DWP highlight the impact of the gender gap on income for older people. Women expect an average annual income of £12,200, 35% lower than men's, at almost £19,000, according to Prudential's study.
Women are also three times more likely than men to have no private pension at retirement, with 20% entirely dependent on the state pension, compared with only 7% of men.
Similarly, the DWP finds that the income for male pensioners as a whole averages £60 a week - over £3,000 a year - higher than for females.
This article was written for our sister website Money Observer
An increase in the general level of prices that persists over a period of time. The inflation rate is a measure of the average change over a period, usually 12 months. If inflation is up 4%, this means the price of products and services is 4% higher than a year earlier, requiring we spend and extra 4% to buy the same things we bought 12 months ago and that any savings and investments must generate 4% (after any taxes) to keep pace with inflation. Since 2003, the Bank of England has used the consumer prices index (CPI) as its official measure of inflation (see also retail prices index).
In exchange for any lump sum – usually your pension fund – an annuity is “bought” from an insurance company and provides an income for life. When you die, the income stops. Annuity rates fluctuate daily and depend on your sex (although from 21 December 2012 insurers will no longer be able to use gender as a factor when calculating annuities), age, health and a number of other factors, so you have to pick the right one and, once bought, its terms cannot be altered, so seek financial advice.