For the pensioners who have been directly impacted by low annuity growth, annuities are unfortunately usually irreversible. The Pensions Advisory Service provides independent and impartial information, free of charge, to any member of the public who may be looking for additional support in this area.
FTA: Despite the pensions shortfall, are there other ways for pensioners to increase their disposable income?
RS: A good rule of thumb around how much annual income a pension can provide is roughly 4 per cent of the total amount.
When it comes to drawdown, our research shows that the less a pensioner withdraws the better it could be for them in the long-term, because their money has more of an opportunity to grow.
Therefore savers should consider whether they want to withdraw the full 25 per cent tax-free cash or whether it is better to make smaller tax-free withdrawals on demand.
As the state pension can’t usually be taken until around a decade after workplace or personal pensions, there’s a chance that some people might not need to access it immediately upon reaching the age of 66.
If a saver has a retirement income from other sources or is still working, it could be to their financial benefit to defer receipt of the state pension.
Delaying the State Pension by just a few weeks could result in a higher weekly State Pension amount, or even a lump sum payment.
As with all pensions, timing is everything and I would encourage savers to only withdraw what they need, at the time they need it, in order to ensure their money lasts well into retirement. The longer a saver can afford to delay, the more they are likely to receive in later life.
FTA Are there any connections to be made between Brexit and the current instability of retirement planning?
RS: The UK's decision to leave the EU has, and will continue to have, implications for pension schemes. Recent market volatility (caused by Brexit and the coronavirus pandemic) has made retirement planning difficult for savers close to or already in retirement.
Some pensioners are finding themselves living off a much lower income than they envisaged. Fortunately, markets now seem to be recovering.
We are still learning about the implications of Brexit on the long term prospect of retirees. But in some instances, British retirees who chose to live abroad have had their State Pension frozen.
This action effectively means these pensioners will not see their pension increase in line with the UK (who under the Triple Lock system, ensure UK pensioners receive an increase each year by the highest of the following: 2.5 percent, inflation, or average earnings growth).
