Retirement incomes keep falling

by Simon Ward on 11 January 2012  |  0 comments
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Low interest rates, high inflation and diminishing annuity returns continue the squeeze on retirees' money.

Two new surveys show the people retiring this year will have a lower income than they expected.

Prudential’s Class of 2012 survey found that this year’s retirees will receive £3,100 less than people who retired in 2008 and £1,100 less than their peers who retired in 2011.

And only 37% of the people surveyed said they had saved enough to enjoy a comfortable retirement. One in five said they would have an income of less than £10,000.

The average retirement income is now £15,500, with Londoners enjoying the highest pot at £17,900 and people in Yorkshire and Humberside the lowest at £12,800.

Continued low interest rates on savings and high inflation are squeezing retirees’ incomes.

Meanwhile, annuity rates continue to fall, according to figures from price comparison website moneyfacts.co.uk. Its 2011 survey of annuity rates found that income fell for a fourth consecutive year.

During 2011, the average income generated by a standard level without guarantee annuity bought for £10,000 fell by 8.4% for a 65-year-old man and 7.7% for a 65-year-old woman.

The Government’s quantitative easing programme has been blamed for the reduction in annuity incomes, as the interest rates on government bonds, or gilts, has fallen.

Dr Ros Altmann, Director-General of Saga, has called for pension schemes to invest in infrastructure projects to provide a ‘win-win’ for both pensioners and the economy.

More: How to get the best annuity rates | How to boost your pension income by 40%