Is your pension annuity income enough in retirement?

Life Trust have been working on producing a report that puts a figure on the cost of retirement. This has been done in conjunction with the Centre for Economic and Business Research, and makes interesting reading…though quite daunting. The report finding suggests that retirees need £413,000 on average to fund a retirement lasting from 65 to the average life expectancy. That’s enough for a very large pension annuity.

From the report: those in the top 20% for earnings could expect to spend £1.55m on their retirement should they live to 100. Spending on transport, recreation and culture, hotels and restaurants, and alcohol and tobacco accounts for 44% at age 65. This then falls to 26% at age 85 and 18% at age 95. The older individual does tend to spend more than others on certain things, but as they are able to do less, they spend less.

Professor Sarah Harper, Director of the Oxford Institute of Ageing, has been quoted on several occasions as saying that soon “90 will be the new 70”. But many people don’t have the disposable income to accompany their physical well-being and living longer.

As we get older, more and more of our budget is eaten up by the basic costs of living. The amount spent on fuel, housing and power increases nearly four fold during retirement going from £34 per week at age 65 to £116 at 92. Those retiring today, born and raised in the long shadow of the second world war, amidst rationing and economic deprivation, may well know a thing or two about sacrifice. 

We should be trying to ensure that people in the decumulation phase are amply provided for the whole duration, but the increase in products such as equity release in recent years reveals that it is not rare for people to run short of income. It is vitally important that we in financial services offer today’s retirees products, services and advice that can save them from foregoing indulgences in their later retirement, in the same way they did at the outset of their lives.

This entry was posted on Tuesday, August 26th, 2008 at 11:31 am and is filed under General. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.