New research from Age UK has highlighted that although many people have exciting plans for their retirement, there is a lack of confidence in how far their money will stretch.
Pension income won’t cover plans
Falling annuity rates and poor returns on savings have meant that securing a comfortable retirement has become an ever more challenging task. Age UK’s research found that 29% of the over-60s interviewed feel uncertain or negative about their current financial situation.
More than a quarter (27%) of those over-60s who feel uncertain or negative about their current financial situation feel that the financial crisis has heavily impacted on their personal pensions and financial plans for retirement, while more than one in four (29%) stated they didn’t earn enough money throughout their career to save for later life.
Financial crisis puts retirement ambitions ‘at risk’
The research highlighted that many people had made exciting plans for their retirement, from extended overseas holidays (26%), to home refurbishments (20%) and exploring new hobbies (16%). However, there was also a realisation that funding the proposed plans might be more difficult than expected.
Gordon Morris, managing director at Age UK Enterprises, said: ‘Our survey shows that many people nearing later life are excited about their retirement and keen to make the most of it, but the financial crisis could put their ambitions at risk.
‘In this challenging economic environment it is more important than ever to properly plan ahead to maximise income in retirement, so that the needs and aspirations of later life can be met.’
Pension projections to be cut
The gloomy research comes on the back of news that the Financial Services Authority (FSA) wants projected investment returns on pensions plans to be reduced from 2014 onwards. The FSA wants investment firms to show more realistic, and less optimistic, potential returns than those currently used.
Current rules require firms to project possible rates of return on investments, to show investors what they might receive. The figures aren’t guaranteed returns but give people an idea of what they might receive from years of making contributions into private pension schemes.
Pension companies use three different rates of return at present – 5%, 7% and 9% – and should adjust these if a scheme appears unlikely to achieve this. The new projections rates will be 2%, 5% and 8%.