Retiring now will leave you £3,000 a year worse off than in 2008

PEOPLE retiring this year can expect to receive about £3,000 a year less than those who retired in 2008, a new study has found.

The typical retirement income anticipated for 2012 has hit a five-year low of £15,500 against the tough economic backdrop, while one in five of those retiring this year expects to have to get by on less than £10,000.

The picture is even more dire in Scotland, where the average pension is predicted to be £14,200 a year, the third-lowest in the UK.

The survey has been carried out annually by Prudential since 2008, when people on the brink of retirement looked forward to a yearly income of about £18,600, including private, company and state pensions. In 2012, the figure is about 16 per cent lower.

The survey was published the day after it emerged that the total deficit of private sector final-salary pension schemes has hit a fresh record level.

The Prudential survey revealed that less than half – 37 per cent – of the “class of 2012” believe they have saved enough to secure a comfortable retirement, with men tending to be more optimistic than women.

Pensioners and those approaching retirement have been hit by high living costs, including soaring fuel bills, at a time when their savings pots have struggled to make real returns, as the Bank of England keeps the base rate at a historic 0.5 per cent low.

Vince Smith-Hughes, head of business development at Prudential, said: “The current economic climate has created the perfect storm for people in the run-up to retirement.

“The impact of the credit crunch, banking crisis, recession and concerns over the eurozone has been reflected in the fact that expected retirement income levels have hit a five-year-low.

“It is concerning that expected retirement incomes are going down, while pensioner expenditure is going up.”

Expected retirement incomes have been on a downward slide since the study began, apart from last year, which saw a small rise.

A separate study published this month by the Association of Consulting Actuaries (ACA) warned of the “seismic collapse” of private sector pensions and called for fresh incentives to boost retirement savings as auto-enrolment approaches.

The ACA reported a growing trend of employers reviewing pension arrangements to cut their costs. It found nine out of ten private sector defined benefit schemes have been shut to new entrants. The study took into account 1,003 people who are retiring in 2012.

A Department for Work and Pensions spokeswoman said: “These findings underscore exactly why we need to get people saving more and why our pension reforms will be so vital. Automatic enrolment, beginning for the largest employers this year, will get millions of people saving, many for the first time.”

Meanwhile, new figures from the Pension Protection Fund revealed that the deficit of private sector final salary schemes had risen from £222.1 billion to £255.2bn in the space of a month to the end of December.

The latest figure is the largest deficit since records began in March 2003, though the PPF has warned direct comparisons are affected by changes to its calculations from April 2011, which had the effect of raising liabilities.

Joanna Segars, chief executive of the National Association of Pensions Funds, said: “Low interest rates, a faltering economy and the side-effects of quantitative easing are all to blame for the rise in liabilities.

“These figures do not reflect the long-term health of pension funds, which work over a long timeframe and are able to manage volatility.”