A new study has revealed that 28 per cent of pensioners face choices that could see them quickly outlive their existing pension pot.
The Pensions Policy Institute’s (PPI) Evolving Retirement Outcomes report shows that many savers currently approaching retirement could experience their retirement income vary by up to 70 per cent, as a result of high levels of defined contribution savings, but little or no defined benefit pension
This degree to which their income will vary in retirement compared to what they had initially hoped to enjoy will be based entirely on decisions they have made, and continue to make, about their private pension schemes.
The study found that an important element in retirement planning by individuals was length of life after leaving work, but consumer uncertainty about how long they expect to live in retirement poses a significant challenge to retirees. Other studies have indicated that individuals underestimate the length of time they are going to spend in retirement by a decade or more.
According to the research, products such as annuities which provide a secure income in retirement could help to prevent pension pots being exhausted, but it advised that savers sought professional advice and guidance when planning retirement to help them secure better outcomes in later life. Other studies suggest that a flexible income in retirement is more beneficial. This can be accessed by a ‘drawdown’ style contract, these are complicated and also require advice.
Policy researcher for PPI Lauren Wilkinson said: “If people are engaged and informed, they are able to achieve positive outcomes using the range of products already available to them.”
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