The first concise picture of current and changing sources of retirement income
Current retirees are satisfied with 47% of pre-retirement income according to a recent report that reveals those approaching retirement are expecting to receive £23,700 per year when they retire. The Retirement Income Uncovered report by Old Mutual Wealth also shows that the average income in retirement today is currently just £19,000 – a shortfall of £4,700 per year, or 25%.
Pre-retirement income
The study also unearths a new magic number for retirement income of 47% of pre-retirement income. On average, people are hoping for around half of their current salary when they retire, and those who stated they were satisfied with their income have achieved 47% of pre-retirement income.
Financial lives
Retirement Income Uncovered looks into the level and source of retirement income for people already retired from full time work, plus those over 50 approaching this crucial part of their financial lives. The report provides the first concise picture of current and changing sources of retirement income, changing attitudes to work in retirement and also levels of satisfaction and understanding of the different sources of retirement income.
Greater contribution
In addition, the report examines how pensions may contribute less to retirement income in the future with other sources expected to make a greater contribution to those yet to retire – property downsizing contributes an average 2% to those currently retired, yet rises to a 15% expected contribution for those yet to retire.
Adjusting expectations
This survey shows that people approaching retirement are not the 'bunnies in headlamps' that many describe. Far from being frozen in fear, the study uncovers a pragmatic Britain, that is adjusting expectations and facing up to the challenges of a retirement that people realistically expect to last for more than 20 years.
Financial advice
Having a target in mind, and seeking professional financial advice makes a real and positive difference to how much you will have when you retire. More people yet to retire are setting goals and that will make them better off in retirement. People are satisfied if they achieve around half of their pre-retirement income when they retire, so perhaps the general rule of aiming for two-thirds is outdated.
Other key findings of the report are:
Retirement reality
We expect retirement to last for 21 years.
41% of retirees receive less than £15,000 per year.
There is a £7,000 gap between men and women's average income in retirement.
The changing face of retirement
Those approaching retirement are 25% less dependent on a final salary pension compared with retired people.
Those who have a retirement income goal are 63% more likely to be satisfied with their retirement income than those that do not.
Planning pays
Those who had a target income in mind before they retired have an additional £157,500 income over the course of an average retirement.
Retirees who used a financial adviser are more than twice as likely to have a target income in retirement – with an average income of £26,000.
The emerging world of pension drawdown
Using pension drawdown can reduce the pension pot required by 25% to generate the average income of £19,000.
Even as income drawdown hits the headlines only 17% claim to have a good level of understanding of it.
Source data:
Old Mutual Wealth partnered with YouGov to conduct research into the attitudes and behaviours of those currently in retirement or approaching retirement. The research was carried out via an online survey amongst YouGov's consumer panel. The sample consisted of 1,536 UK adults aged between the ages of 50 and 75. The sample was split up into 5 brackets (50-54, 55-59, 60-64, 65-69 and 70+) with a target quota of 300 participants in the research from each age bracket. YouGov invited a nationally representative sample to take part within each age bracket. Fieldwork was carried out between 4th July and 10th July 2014. 
