The average retired household makes money from interest on cash savings and returns on equity-based savings, according to MetLife analysis.
Savings and investment income is boosting retired household income by up to £10.3bn a year, worth around £1,445 to the average household.
Before interest rates were cut to 0.5 per cent in March 2009, investment income was worth more than £12.37bn – the equivalent of £1,863 per household – to pensioners.
This slump in investment savings contrasts with the increase in total pensioner income.
MetLife’s analysis of Office of National Statistics data shows median retired household incomes at £21,100 are now £1,800 higher in real terms than at the depths of the recession in 2007 to 2008.
Investment and savings income currently accounts for around 6.8 per cent on average for retired households, compared with 10.3 per cent in 2007 to 2008.
However, for wealthier households, investment income contributes nearly 22 per cent of total income and is worth around £8,200 annually.
Dominic Grinstead, managing director at MetLife UK, said investment income can make a major contribution to boosting standards of living in retirement.
He said: “But historically low interest rates and continuing volatility has squeezed investment income for retired households, highlighting the need for alternative solutions, which can help boost pensioner finances.
“Isas have a major role to play in planning for retirement and there is a need for innovation to provide more certainty and flexibility over income and capital which is where guaranteed solutions can play a major role.”
peter.walker@ft.com
