Pummeting annuity rates and poor investment returns means thousands cannot afford to stop work.
While a third of those delaying their retirement said it was because they were not ready to quit work yet, the overwhelming majority said they were forced into this position due to their financial situation.
This survey, by the Prudential, comes after annuity rates fell to new lows in recent weeks and concerns that another bout of quantitative easing, as well as fears that new EU rules will push rates still lower.
Twenty years ago a 65-year old man retiring with a £100,000 pension fund would have been able to secure a guaranteed income of over £15,000 a year. Today, with annuity rates at less than 6pc, the same pension fund buys less than £6,000 a year.
At the same time those approaching retirement have been hit with a decade of poor investment returns, while at the same time many company’s have scaled back workplace pensions.”
The Telegraph Feb 15th
Two things to say about this.
Firstly , things aren’t set to get an awful lot better, QE will keep annuity rates at current levels and Solvency II will make them even more expensive. Investment returns are unlikely to deliver a quick fix in a low-growth economic climate.
The ageing workforce is not the stuff that HR manager’s dreams are made of. Nor is it what youngsters who cannot get onto the career ladder like to hear about. Not only are the oldies sitting on all the housing equity and blocking their home ownership, now they’re sitting around like bad smells instead of jetting off on holidays to the Caribbean.
Secondly, something needs to be done about this. It’s no good telling us what we already know unless you have a plan to make things better. Until last week, I didn’t see much progress in the “things are getting better” stakes and I’m still not sure that we can do much for those trying to annuitise today. Other than to make sure they get access to good advice on their retirement options (thanks Martyn Lewis– just re-read your stuff on moneysavingexpert)
We can do something to make about the next lot of people looking forward to retirement and we can do so using Steve Webb‘s drive and vision.
The next few weeks will see if we can turn aspiration into perspiration.
- Aspirational pensions – popcorn pensions!! (henrytapper.com)
- Define your aspiration. (henrytapper.com)
- Can we have a word Mr Webb? (henrytapper.com)
- The NAPF point the finger at the £1bn annuity scandal (henrytapper.com)
- Pension pots evaporate as annuity rates fall (moneyexpert.com)