Total annual pensions income forecast to hit £106bn by 2022
Pensioners retiring in 2022 will receive £9bn a year more from their private pensions and annuities than those retiring this year, an Experian analysis reveals.
Based on insights provided by its in-house economists, the study showed the total annual income currently rests at £97bn.
This will rise to £106bn by 2022, the firm added, with around £4.5bn of the extra income going to the UK's richest 30% of households.
However, despite rising annual pensions income, forecasts using Experian's Financial Strategy Segments showed the retirement income people across society can expect varies greatly.
According to the analysis, the ‘Sunset Security' category, who identify as retired homeowners with moderate savings, and act as cautious investors, can expect the biggest change in retirement income.
Their weekly income from private pensions is expected to fall from £41.05 as recorded in 2015 to £34.63 by 2020 - a drop of nearly £6.50 a week.
The same analysis found the ‘Platinum Pensions' category, who identify as elderly people with good pensions who are enjoying a comfortable retirement, will see a rise in both state and private pension weekly payments.
For this group, state pension payments will increase from £148.19 to £175.90 between 2017 and 2020, while average private pensions income will rise from £75.06 to £77.42, the firm predicted.
Meanwhile, the ‘Stretched Finances' category - typically middle-aged adults in lower skilled jobs, often renting their homes from local authority - will see its weekly income from private pensions drop from £17.72, as recorded in 2015, to £14.64 by 2020. This group makes up 7.5% of households.
The firm's head of wealth, life and pensions Richard Howells said the pensions dashboard will contribute to the expected surge in annual retirement income.
"It is encouraging to hear the government is now pressing forward with the dashboard," he said. "Trends in society and economics mean people are working longer, for many different employers and often across a range of industries.
"As a result, people can forget about pensions savings they have made in a previous job and lose visibility of them. The pensions dashboard prototype project estimates £400 million of pensions are unclaimed."
From 2006 to 2016, the Sunset Security group's combined state and personal pensions income moved from £173.61 to £187.82 - an increase of over £14 per week - the study demonstrated.
Over the same period, those in ‘Stretched Finances' saw their combined pensions grow by just £0.51, which Howells said is an example of how fortunes can change.
He added: "The rollout of auto-enrolment and a heightened awareness of the need to save for later in life has boosted the income pensioners receive. But the reality is many people have little idea what income they can expect when they retire."
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