People retiring this year expect to be £1,270 a year worse off than people who gave up work in 2009 as expected income fell for the third year running, according to newly released research from Prudential.

The findings suggest that the UK's adults who are planning to retire in 2010 expect to receive £3.49 billion less in their pensions compared to those who retired in 2009.

People planning to retire this year are expecting average annual incomes of £16,509 compared to £17,779 in 2009 and £18,663 in 2008.  Expected incomes are 7 per cent lower than in 2009 and 11.5 per cent down on 2008

The Prudential study shows the effects the recession and stock market volatility has had on retirement saving and Andy Brown, director of investment funds at Prudential, believes the figures may suggest that people are becoming more realistic about the amount of money they will receive when they come to retire.

‘The recession has clearly had a major impact on peoples' expectations of their pensions.  I think what we're seeing is the emergence of pragmatism following the credit crunch with people perhaps being more realistic about the anticipated size of their pensions, in the same way that many homeowners are now taking a more balanced view of the value of their property.

‘The fact that people retiring this year expect to receive less in their pensions than people who have retired in the past two years should come as a reminder that putting money into a pension or other savings, and starting sooner rather than later, is the only real way of guaranteeing a decent income in retirement.’