Pension warning as retirement incomes increase – you could need more than £21,600 per year

State pension: Retirement age 'likely' to increase says expert

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Pension saving can be an important task for people progressing towards their retirement, and drawing together streams of income is vital. Whether it is the workplace pension, a private arrangement or the state pension as overseen by the Government, all can combine to create a healthy fund for someone in later life. However, with the cost of living continuing to rise, it is clear Britons will need to put aside a healthy sum for once they leave the workforce.

Research undertaken by equity release adviser, Key, has shown the extent of the matter.

The recent study illustrated that average retirement incomes have risen by £1,000 in a year to £21,663.

While this is good news for those who have saved this amount or above, it is clear those who currently fall short of this goal will need to take action.

Failing to do so could mean individuals struggle in later years to meet basic costs as well as other goals in retirement. 

Further findings from the research found that one in five Britons will still be retiring on less than £12,500.

This is a sum outlined by the Joseph Rowntree Foundation as the minimum income standard in retirement.

The situation appears better for those who have a partner or spouse when they retire, with expectations of a £22,500 income, nearly a fifth higher than than £18,900 expected by singletons.

Sources of retirement income, however, can vary, but are mostly split between major sources of income.

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The state pension is relied upon by many however, 32 percent stated they would be using their company pension scheme, with 13 percent looking at a personal pension.

Other savings and investments are also set to be used by retired individuals.

But there is also variation when it comes to different areas of the UK, with higher incomes in London when compared to other regions.

Indeed, those who are expecting the lower retirement income at £17,813, are individuals living in Wales. 

Despite the pandemic, the expected retirement income of those who are planning to finish full-time work has grown by £1,000 in 12 months, from £20,663 in 2020 to £21,663 in 2021.  

Will Hale, CEO at Key, commented on the matter by providing further insight.

He said: “Retiring from work is going to take serious financial adjustment at any period.

“While it’s great that expected incomes have increased this year, they are still only around three quarters of the income level many will be used to while working.

“The retirement class of 2021, like their 2020 predecessors, are planning to retire in one of the most turbulent times in recent history, due to the pandemic.

“The economic uncertainty we all face means it’s more important than ever to plan finances and be aware of all income options for the year ahead.”

Mr Hale also highlighted the matter of homeowners versus those who do not own property.

Although these individuals are likely to be financially better off, it does not mean they will not face unexpected costs later down the line, alongside the ongoing upkeep of a home.

He concluded: “Using their property wealth to meet these costs or boost their income is certain something which should be considered.

“This is especially as modern equity release products boast flexible features such as drawdown facilities, fixed ERCs and the ability to serve interest or make ad hoc capital repayments which makes managing borrowing in line with changing circumstances far easier than ever before.”

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