Pensioners To Play The Markets To Boost Incomes

Retirement savers are ready to the stock markets to find returns that outstrip inflation and make life more affordable once they give up working.

Fears that inflation will eat into savings and reduce spending power are the main worry of a third of workers approaching retirement.

According to research by financial firm MGM Advantage, 53% of all workers share this concern with the over 55s.

They see putting some cash aside in stocks and shares as one way of managing their financial problems.

Fear of not having enough money outweighs other major retirement concerns, like poor health, which is a fear for 45% of over 55s or losing a partner, which is a worry for another 32%.

Cost of living fears

Andrew Tully, pensions technical director at the firm, said: “Even though the economy is improving, people fear any increase in the cost of living will impact on their retirement and leave them short of cash.

“Investing in stocks and shares may not be everyone, but is obviously one of the financial strategies many people approaching retirement are considering.”

Meanwhile, easy access pension policies starting in April 2015 and poor returns have decimated the annuity market, according to the Association of British Insurers (ABI).

Many retirees traditionally looked to annuities to provide a guaranteed retirement income.

According to the ABI, annuity sales dropped by a third in favour of drawing down small pot pensions in the second quarter of 2014.

The ABI also remarked that many retirement savers with larger pension pots are opting to buy annuities because their pension policies had guaranteed annuity rates. Many recent schemes scrapped the guarantee in favour of buying an annuity at the current market rate.

“We are seeing many of the annuities sold now going to consumers at enhanced rates,” said an ABI spokesman.

Enhanced annuities

“The signs are government ease of pension access rules are leading people to shop around and look at alternatives to annuities.”

Enhanced annuities offer higher than average rates to investors who generally have a medical condition which means they are likely to die younger than the average retiree.

The ABI position takes an opposite view to the MGM research.

MGM says more than half of retirees will boost their pensions by investing in equities, but the ABI feels annuities will still be popular.

“It’s early days yet to determine how consumers will act after April 2015 when the recent Budget reforms take full effect,” said the spokesman.

“We think a considerable number of savers will still seek a guaranteed income offered by an annuity, but we will have to wait and see.”

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