Defined contribution (DC) savers aged over 55 and planning plan to buy an annuity have suggested that £22,500 is the ideal retirement income, according to research from Canada Life.

This figure would be equal to the moderate living standard as identified by the Pensions and Lifetime Savings Association (PLSA) retirement living standards, and would require private pensions to generate an income of around £13,161 a year, based on the current state pension of £9,339.

The research found little difference in the ideal retirement income based on gender, with men identifying £22,900 as the ideal figure, while women were prepared to accept the slightly lower amount of £21,500.

However, the value of a saver's pension pot had a "clear effect" on expectations, as the research revealed that, for those whose pension values are under £200,000, £20,000 was the average ideal retirement income, while for those whose pension is over £200,000, the figure increased to £28,300.

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

"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.”

The research also considered expectations around retirement living standards, revealing that nearly half (46 per cent) of respondents expected their living standard to remain the same in retirement.

In contrast, 36 per cent thought their living standard would get worse, and just 10 per cent thought that their living standards in retirement could be an improvement.

However, twice as many men than women were optimistic as to what to expect in retirement, with 12 per cent of men stating that they expect their living standards to improve, compared to 6 per cent of women.

Pension values were also found to have a “significant baring” on the positivity towards retirement living standards, with 20 per cent of pre-retirees with pensions valued at over £200,000 saying they think their living standards will be better, compared to 8 per cent whose pensions are valued at less than £200,000.

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

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