Ros Altmann, the pensions minister. Photograph: Neil Hall/Reuters Figures released by Prudential this week have indicated that the next generation of people retiring could be worse off in their retirement than those people finishing work this year. Those retiring in the future expect to have a much lower average annual income, which they believe will not be enough to provide them with a pensioner lifestyle that is comfortable.
According to the Prudential's latest research which studied over 1000 people between the ages of 45-55, 18% of respondees expect to be worse off, with the vast majority expecting to work till the age of 65, and estimate that their average annual income in retirement will be just £14,000 per year.
This contrasts heavily with the figures from another study by Prudential, the 'Class of 2015' which studied 7687 adults intending to retire in 2015. This found that expected retirement incomes were the highest in six years, with people retiring in 2015 expecting an average income of £17,000 per year. 50% of people retiring in 2015 expected to be financially 'comfortable' in retirement, compared to 27% of people retiring in the future. 70% of people aged 45-55 said that they expect to have a much lower standard of living that those people already retired, with just 6% expecting their standard of living to get better.
This gloomy outlook for future retirement is one of the problems auto-enrolment was designed to tackle. Currently being rolled out across the UK, it will see millions of workers automatically placed into a pension scheme, with a slice of their pay being automatically diverted into their pension pot. Employers will be obliged to pay into their employee's pots too, as well as the employees also receiving a boost from the government through some tax relief.
Although people can opt-out of auto-enrolment, it is thought that most will opt to continue in their pension scheme, and build up a retirement fund they might not have had if they had not been auto-enrolled into a scheme. This is the scenario suggested by the KiwiSaver in New Zealand which is the closest relation to the UK's auto-enrolment and has been in place for over 20 years.