New data from Partnership has revealed than many pensioners may face poverty because of a lower retirement income. They foresee a danger that some retirees may be forced to live on just £8,000 per year. Given the dangers of this predicament, it is vital that those approaching retirement search the market for the best rates on annuities it is argued.
There are several reasons which contribute to a potentially lower retirement income for individuals. One of them is the fact that people are not building up a big enough pension pot during employment. Additional financial pressures brought about by the recession also mean that saving for retirement has become much harder for many people. Given that generous final salary pension schemes are few and far between these days, retirement income has become extremely problematic for a substantial number of those nearing retirement.
Given this bleak assessment, the whole problem is therefore compounded when people fail to shop around for an annuity. The vast majority of annuities purchased in the UK are for less than £50,000 (90% in fact), with 75% being under £30,000. And a £30,000 pension annuity will on today’s rates only yield a retirement income of around £2,000. Once you add on the state pension of around £6,000 you don’t end up with a very heathy income. And with 62% of annuitants still opting for their current provider, thousands of pounds worth of potential income goes begging.
Some have estimated that around 40% of the UK population are eligible for enhanced annuity rates, which pay a much higher income than standard rates, up to 40% more. Philip Brown who is the head of retirement products at Partnership said that…”..the figures demonstrate that, put simply, people are not investing anywhere near enough for their retirement years.”
