Research shows that annuity rates fell by close to 8% during the course of 2011. As if this isn’t bad enough a recent Prudential study finds that around 25% of new pensioners actually retire in debt. Yes, retirement incomes for new retirees have been badly hit, with annuity rates falling by a quite staggering 8% last year, and that’s a big drop and a big hit on retirement incomes. On the back of this the report Prudential suggests, quite rightly, that the annual income that can be purchased with a pension fund has dropped sharply. On top of this, annuity incomes could actually be half what they might be if the open market option isn’t utilised and people don’t shop around for the best deal when they retire.
The reports shows that older people could be losing out on higher annuity rates and on their important retirement income because of a lack of knowledge about certain terminology. It also shows that over-55s are neglecting to plan properly for their retirement, and that there is generally a lack of confidence in pensions. As such, pensioners could be losing significant amounts of their retirement income because they are struggling to pay off their debts.
This is the findings of the newly released Class of 2012 study by Prudential, which found that the average individual finishing work now has outstanding debts of something approaching £38,200, with most of this being related to mortgages and credit cards. These debts are likely to cost the average person about £260 a month, or as much as one-fifth of their income. Indeed, most pensioners believe it will take them nearly four years to get back into the black, so to speak, while 8% are worried that will never happen.
Prudential’s Vince Smith-Hughes suggests that retiring with outstanding debts to pay off might be a sign of a lack of proper financial planning, and therefore those people still at work should save as much as possible as early as they can and consult an adviser to help them plan as best they can for a comfortable retirement.
Just last month Aviva found that nearly 37% of over-55s have yet to make any realistic plans to cover their spending in their retirement. However, choosing to purchase an annuity using the open market option is one way of getting a better retirement income.
