04 December 2009
Following research from financial information firm Moneyfacts,
workers approaching retirement are facing the lowest payouts in
history. They are likely to get just half the income they would
have received if they had saved the same amount of money 15 years
ago.
Experts said workers who want to retire are facing a 'nightmare'
which no previous generation has had to cope with. Many will have
no option but to keep working into their 70s or sell their family
homes to survive.
The bleak outlook affects workers with 'defined contribution'
pension arrangements, such as company pension schemes and private
pension schemes where they have a pot of money to buy an annuity
with.
The research looked at the annuity a £10,000 pension pot
can buy. In 1994, a 65 year old man could have been paid an annual
average pension of £1,145. Today, he would get just
£625, a drop of 45 per cent.
For women, whose payouts are lower than men because they tend to
live longer, the figure has fallen from £1,016 to just
£585.
To make matters worse, the research is based on the most common
type of annuity, which does not increase during payment. As a
result, the spending power of the money is eroded by inflation,
leaving pensioners even worse off.
About a third of people fail to shop around for an annuity on
the 'Open Market' where they may get a better deal than from their
current pension provider.
