£22,500 is ‘ideal’ retirement income for savers – Canada Life

People approaching their retirements and planning to buy an annuity would ideally require an annual income of £22,500 on average, analysis from Canada Life has indicated.

This ideal income equates to a moderate living standard, according to the PLSA retirement living standards.

For those whose pension values are under £200,000, the average ideal retirement income was £20,000, while for those whose pension is over £200,000, the figure is £28,300. This figure is closer to the comfortable retirement living standard as calculated by the PLSA.

Canada Life’s research, based on a study among 506 UK adults, revealed that pre-retirees were split on whether they expect the same standard of living as they have now when asked about living standards.

The study found that 46% of respondents thought their retirement living standards would remain as today, while 36% said they would get worse. Another 10% of respondents think their living standards will be better in retirement than they are now.

Canada Life also stated that pension values have a significant baring on the positivity towards retirement living standards, with 20% of pre-retirees with pensions valued at over £200,000 saying they think their living standards will be better. This compared to 8% whose pensions are valued at less than £200,000.

However, around one in four (26%) of those with pensions over £200,000 thought their standard of living will fall in retirement, compared to 40% whose pensions are valued at less than £200,000.

“A generation of savers planning their retirements have relatively moderate ambitions for their ideal incomes,” said Canada Life retirement income director, Nick Flynn.

“Far from splashing the cash, the over-55s are seeking an income of around £22,500, which combines both private savings and the state pension of around £9,339 currently. This requires the pension and any other savings to generate an income of around £13,161 a year.

“At current standard annuity rates, a pension of £200,000 could deliver around £10,000 a year guaranteed for life, likely to be more for those who qualify for enhanced rates and a better income because of their health or lifestyle.

“Buying an annuity is a significant financial step and an adviser or annuity broker will be best placed to help understand the choices available.”

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