Axa: 80% believe pension value will decline
Report co-author says mismatch between financial situation and expectations exacerbated by “complicated” pension system.
Around 80 per cent of pensioners believe that the value of their pension will decline as inflation takes its toll on retirement income, an Axa Wealth report has revealed.
The cost of living in retirement report, written in conjunction with Liam Foster of the University of Sheffield’s department of sociological studies, suggests that British retirees know they face a tough future but haven’t made the necessary provision to counter it.
Part of this lack of preparation could come from the fact that 69 per cent of people retired sooner than they expected, mostly due to ill health, redundancy or offers of early retirement.
If retirement is being enforced or is unavoidable, individuals are likely to be less prepared, with 58 per cent of 200 respondents admitting to having not sought any professional financial advice in advance.
Furthermore, 45 per cent have never calculated the pension benefits they would receive in retirement and of those that did seek professional help, 14 per cent waited until just before they retired.
The report also highlighted that, critically, 40 per cent of pensioners have said they would need more money in order to feel ‘comfortable’ in retirement.
For those who said they would need more money, 60 per cent said they needed £4,000 or more a year. When faced with buying an annuity, significant additional funds would be required to buy such an amount, particularly if some degree of inflation-proofing or dependant’s benefit was also needed.
Simon Smallcombe, head of guaranteed distribution for Axa in the UK, said: “Retirement planning should be an ongoing process that can adapt to changing circumstances using a combination of products; perhaps with guaranteed products forming a core income, supplemented by capped or flexible drawdown as well as income from other tax wrappers as required.
“Advice is not just something you seek a few months before your last day at work.
“It is common for people’s expected income in retirement not to be matched by realistic financial preparations. This situation is exacerbated by the British pension system being one of the most complicated in the world.
“Therefore, suitable advice, information and planning have an important role to play in encouraging appropriate pension saving for retirement.”