Figures from national advisory firm Key Retirement Solutions showed retired households had received £1,863 from investments and savings in 2007/2008, approximately 10 per cent of their annual income. However, this fell by a third to £1219 last year – equating to just 5.5 per cent of their annual income.
The worst period for investment income came in 2009/2010, when pensioners received just £931 each, a year. This represented a total national drop of £6.663bn from the pre-crisis era of 2007/2008. The stock market recovery helped investment returns pick up in 2010/2011, rising to an average of £1,207 in retired households.
Dean Mirfin, group director of Key Retirement Solutions, blamed the continuing erosion in annuity rates, now 29 per cent lower than in 2008, and in savings returns. He said: “The Government’s Funding for Lending Scheme is doing a great job for borrowers but savers are suffering and there is little sign of the Bank of England increasing the base rate in the near future.”
He added that property could be the main source of wealth for retirees who have paid off mortgages, worth roughly £752bn.
Adviser View: Nick Lincoln, director of Hertfordshire-based Values-to-Vision Financial Planning, said: “Cash is very dangerous and a surefire way to lose money right now. Annuity rates have been falling since 1990, even though every year they look like they may plateau. That’s why income drawdown is becoming more attractive, so long as they invest at a sensible withdrawal rate and have a good investment strategy. Also, if you can’t sell the equity release concept, you never will.”
YEAR
AVERAGE PENSIONER INVESTMENT AND SAVINGS INCOME
TOTAL PENSIONER INVESTMENT AND SAVINGS INCOME
LOSS/GAIN
2007/08
£1,863
£13.32 billion
N/A
2008/09
£1,352
£9.668 billion
-£3.65 billion
2009/10
£931
£6.657 billion
-£6.663 billion
2010/11
£1,207
£8.631 billion
-£4.689 billion
2011/12
£1,219
£8.717 billion
-£4.6 billion
