PensionsOct 23 2018

Most pensioners without reserves for market slump

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Most pensioners without reserves for market slump

Three quarters (75 per cent) of pensioners with their pots invested had insufficient reserves to fall back on in case of a market shock, research has shown.

Retirement financial advice firm Responsible Life polled 1,023 UK pensioners and concluded 45 per cent of those who went into drawdown rather than buying an annuity had no reserves to call on if share prices fell.

Of the remaining pensioners, 30 per cent admitted there wasn’t much in these savings accounts or reserves and it would be used up quickly if they had to rely on it.

Most global stock markets fell today (23 October), continuing the volatility seen over the past few weeks with a sell-off of Chinese equities overnight precipitating a sell-off in European shares.

Responsible Life’s research showed nearly two thirds (61 per cent) of retirees had kept their personal pension invested, with 80 per cent of them saying they had little choice but to keep drawing from it even if its value plummets.

Recent stock market reverberations meant 95 per cent of the respondents feared for their retirement plans and standard of living if the volatility worsened, and more than half (55 per cent) now wished they had taken out an annuity.

The survey found nearly nine in 10 (89 per cent) used their pension as their main source of income and 40 per cent say they would have to reduce the amount they took out of their pension, or stop altogether, if securities drop.

Steve Wilkie, managing director of Responsible Life, said retirees who invested their pensions might have seen it pay dividends in recent years, but he warned: "The outlook has changed and they are now at the mercy of market forces".

Mr Wilkie said: "It means many people with no additional savings who worked hard to save a substantial nest egg face Hobson’s Choice — continue to live off their pension and damage it severely in the process or become a spendthrift.

"They are damned if they do, and damned if they don’t."

maria.espadinha@ft.com