|Investment Property Worldwide.com
Savers approaching retirement are being advised to put off buying a lifetime annuity – or even to consider deferring retirement – as the euro crisis further reduces the income offered to UK pensioners.
Pension experts issued the advice after the FTSE 100 index suffered its largest one-day fall since November, as investors fled equities on fears of a Greek exit from the single currency – and bought into “haven” assets, such as government
This shift is significant for those planning their retirement as both the annuity income they can buy with their pension funds, and the income they can draw directly from their funds are determined by the yields on government bonds, or gilts. Heavy buying has pushed gilt prices up, reducing yields to record lows.
“It’s such an awful and difficult situation for anyone approaching retirement,” said Dr Ros Altmann, director-general of the Saga Group, the financial services group for over-50s. “If you can delay, it is worth considering because at some point there should be a correction in rates.”
Joanne Segars, chief executive of the National Association of Pension Funds, said: “People who are nearing their retirement need to think carefully about whether this is the right time to lock into the current low rates of interest.”
Advisers suggested taking pension cash in stages. “It’s possible to phase into retirement by taking tax-free cash only,” said Mike Morrison, head of pensions development with Axa Wealth. “In the short term, it may be possible to take income from elsewhere.”
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