Drop in confidence of the Class of 2012

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Nearly half of people retiring this year in Yorkshire and North Lincolnshire are confident they will be able to afford to leave an inheritance despite the on-going squeeze on family finances, new research from Prudential shows.

Now in its fifth year, Prudential’s ‘Class of’ research looks at the finances and expectations of those planning to retire this year.

The Class of 2012 report found that nationally, 49 per cent believe they will be able to afford to retire and still leave money or other assets to their families. This compares to 48 per cent in Yorkshire and North Lincolnshire.

People retiring this year are slightly less confident than the Class of 2011, when nationally 52 per cent said they would be able to afford to fund their retirement as well as leave an inheritance to their loved ones.

However, one in 12, or 8 per cent, say they would cancel their plans for leaving an inheritance if they start to struggle to make ends meet.

This year’s retirees would consider two main ways of boosting their retirement income. Thirty three per cent say that they would sell the family home and downsize, while 29 per cent say that they would consider returning to some form of paid employment.

However, more than two-fifths, or 44 per cent, say their families are not expecting to be left an inheritance at all, compared with 35 per cent who believe their families do expect to inherit something.

Matthew Stephens, inheritance tax expert at Prudential, said: “Being able to leave an inheritance is important to many people and our research shows that despite the squeeze on living standards, nearly half are confident they will be able to fund their retirement and still leave money or assets to their loved ones. Inheritance planning is crucial in the run-up to retirement. The inheritance tax threshold has been frozen at £325,000 until 2015, meaning that many people will potentially face a tax bill if they do not plan ahead.”

Vince Smith-Hughes, retirement income expert at Prudential, said: “Average expected income for retirees has decreased significantly over the last five years, from £18,600 in 2008 to £15,500 this year, suggesting that market volatility and rising inflation – in particular – are increasingly impacting on both consumers’ attitudes to retirement and on their pension pots.”

On the future, he said: “We are living in uncertain times where it is becoming increasingly difficult to second-guess what the markets are going to do. Due to such uncertainty, it is imperative to ensure that you make your own provision for your retirement. People retiring this year expect to retire on an annual income of £15,500, according to our Class of 2012 research, but in a sign of the ongoing financial challenges facing people, one in five will get by on an expected income of less than £10,000. Regularly consulting a financial adviser to ensure your retirement goals are on track is an essential part of planning.”

Men are more confident about leaving an inheritance than women – 53 per cent of men planning to retire this year expect to leave money to their loved ones, compared with 46 per cent of women, according to the research.

People retiring in Wales are the most confident in the UK about leaving an inheritance, with 59 per cent believing they can pay for their retirement and still leave money to loved ones, followed by 54 per cent in the South West and 53 per cent in Scotland. People in the West Midlands are the least confident, with just 43 per cent planning to leave an inheritance.

The research was based on an online survey conducted by Research Plus between December 2 and 12, 2011, among 9,614 UK non-retired adults aged 45 plus, including 1,003 retiring in 2012.