MILLIONS of new pensioners were warned this week that they face a retirement of poverty after weeks of slashed annual payouts.
Pension companies have cut rates offered on their guaranteed annuity incomes 24 times since the start of summer.
Standard Life is the latest to do so, lopping five per cent off the rate offered to the newly-retired and those approaching retirement.
And male pensioners will suffer an extra blow later this year with the introduction of the EU’s new “gender directive” which will further force down annuities for men.
Craig Palfrey, founding partner of independent financial advisers Penguin Wealth, said: “Annuities are in meltdown. We’re way beyond red alert. They have been coming down relentlessly and Standard Life’s decision to take a sword to rates is just the latest example.
Twenty years ago a £100,000 pension fund would have guaranteed an income of £15,640 a year for life for a 65-year-old man. Now it is just £5,140 a year.
And the crisis decimating pensions is set to continue for months, perhaps even years, piling on the agony for the newly-retired.
Experts warn that the situation is likely to worsen as annuity providers struggle with volatility in the stock market and the Bank of England’s quantitative easing (QE) strategy to tackle the recession.
The money-printing policy has been attacked for triggering “a death spiral” in pensions, which some experts say has led to the worst retirement payouts in history.
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Millions will see pensions slashed by up to 20% as new EU rules are set to send annuities plummeting
MORE bad news on pension's!! TIME TO ACT!
Millions of people could see the value of their pensions slashed by up to 20 per cent because of new EU rules.
Those with a £100,000 pension fund could be more than £1,100 per year worse off in retirement because of the reforms, research has shown.
The Solvency II rules, which are due to come into effect in January 2014, will force pension funds to hold a higher proportion of 'safe' Government bonds.
As the bonds - called gilts - have such low rates of return it will drive down the returns on retirement fund annuities, which are used to pension income.
The reforms are designed to make pension funds safer and reduce the risk of them going bust.
Annuities, which set retirement income for life, have already fallen to historic lows because of the impact of quantitative easing.
At present, a pension annuity fund may invest 20 per cent in low-yield gilts and the rest in riskier corporate bonds which have a higher rate of return.
But under the new EU rules, annuity funds will be forced to hold a higher percentage of gilts.
New research by Deloitte suggests annuity rates will plunge by between five and 20 per cent when the directive comes into force in January 2014.
A £100,000 pension pot currently gives an income of £5,837, but once the regulations come into effect they will be between £292 and £1,167 a year worse off.
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Read more: ARTICLE LINK
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Video Introduction to SIPP's
Thousands of pensioners across the country have little hope of experiencing the
retirement lifestyle they would have wished for due to low annuity rates.
Any chance of a comfortable pension pot may have crumbled as annuity rates fall and high inflation eats away at what little is left.
UK adults are living longer, working less and spending more. According to the Office for National statistics, two thirds of men and three quarters of women now reach the age of 75. With this in mind, it can be hard to see a viable way of planning for your future financially, especially in such a fragile economy.
Britain may be on the brink of another recession and there is not much that those edging towards retirement can do personally about the low interest rates and high inflation. However, there are some forms of financial protection against sudden falls in the value of investment funds.
The amount of annual pension someone can buy with their savings has been falling for some time and there is little sign of improvement, so is now a good time to take out a pension?
Author – Moneyexpert.com full article - http://www.moneyexpert.com/financial-news/none/800580546/pensionpotsevaporateasannuityratesfall/article.aspx?affiliateid=405&campaign=A1505
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More people are planning to ask their employer if they can continue working past retirement, amid fears that they have not saved enough to stop working and live comfortably.
One in four people aged over 60 still in employment has asked their employers if they can continue to work after the official retirement age of 65, while a further 26 per cent are intending to do so, according to research from MetLife, the pension provider.
A third of those hoping to work beyond 65 said they needed to have more time to build up their retirement savings, with 45 per cent saying they could not afford to retire.
Author - Alice Ross FT.com
To read the articles in full follow the link - http://www.ft.com/cms/s/2/7885f35a-d3bc-11e0-bc6b-00144feab49a.html#ixzz1WhX9r94a
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