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Survey finds next generation of retirees will be worse off

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New research from Prudential finds that those aged 45 to 55, the next generation of retirees, expect to be worse off in retirement by almost a fifth (18 per cent) compared with those leaving the workplace this year.

Seven in ten (70 per cent) of those aged 45 to 55 say that they expect to have a lower standard of living than people currently in retirement and almost half (49 per cent) of the next generation of retirees have put their pension contributions on hold at some point during their working life.

The insurer’s study revealed that people aged between 45 and 55 expect to work until they are 65 years old and estimate that their average annual retirement income will be GBP14,000 a year when the time comes for them to stop work.

 
In contrast, figures from Prudential’s study of the ‘Class of 2015’ – those planning to retire this year – show an expected average annual income of GBP17,000, leaving a generation gap in retirement income of GBP3,000 a year.
 
Just 27 per cent of the next generation of retirees, those aged 45 to 55, believe their pension will provide them with sufficient income to enjoy what they consider to be a comfortable life in retirement. This compares with half (50 per cent) of those planning to retire this year.
 
Prudential’s research also found that the generation gap in retirement income comes as no surprise to the next generation of retirees. Seven in ten (70 per cent) of those aged 45 to 55 say that they expect to have a lower standard of living than people currently in retirement, while only six per cent expect their standard of living to be better.
 
Almost half (49 per cent) of the next generation of retirees have put their pension contributions on hold at some point during their working life. More than one in ten (11 per cent) have taken a break that lasted more than a decade, and a further 20 per cent have stopped making contributions for between three and ten 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 incomes 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."
 
 

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