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Retirement income expected to fall in 2012

More than £3,000 has been wiped off the value of pension pots in the past four years, according to a new report by Prudential insurance.

The survey found that individuals retiring this year can expect to receive an average retirement income of £15,500 - £3,100 less than those who retired in 2008.

Experts have attributed the fall to the recent chaos on the stock market and shrinking annuity rates, which dropped by 8% in 2011.

Vince Smith-Hughes of the 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 thought that one in five pensioners expect to live on £10,000 a year or less. This figure includes the state pension and income from private and company pension schemes.

Ros Altmann, director general of over-50s group Saga, said: ‘This latest report shows the terrible and permanent damage this temporary boost to the economy has done to pensioners.

'Savers retiring today are being locked into a lower pension for life because of the drop in annuity rates’.