Business NewsFlooring Headlines

Inflation Wipes £6bn Off Retirees’ Income

Up to 360,000 retirees a year could see a combined £6.3 billion wiped from their retirement income due to rising inflation, a report by MGM Advantage has found.

It calculated that if inflation rose an average of three per cent a year over a 25 year retirement period, the value of incomes would be reduced by more than half (53 per cent).

MGM Advantage said this was a ‘conservative figure’ based on an average pension pot of £33,000 and the most common choice of annuity. Nine out ten retirees purchase a level annuity, which does not take rising prices into account.

This follows last week’s news that rising costs of air travel and motor fuels pushed inflation in the UK up to 2.7 in May from 2.4 per cent in April.

On average, annual inflation in the UK since the 2007/08 financial crisis has been 4.5 per cent, with many individuals feeling the effects on their savings and retirement plans. The Bank of England’s stated target for inflation is two per cent.

Andrew Tully, pensions technical director at MGM Advantage said: “People close to retirement have some very tricky decisions to make when looking to convert savings into retirement income. With record low annuity rates the obvious solution could be to shop around for the best starting income you can find.”

Suggestions on how to protect your retirement income from inflation include:

  • Shopping around to find the best annuity rate
  • Enhanced annuities if you have a pre-existing health condition
  • Escalating annuities, which link income to rising inflation (these may, however, come with a lower starting income)
  • Delaying your retirement or when you start taking your pension income
  • Income drawdowns.
Show More

Floors Magazine

Floorinsite.com brings you daily flooring news, features, tenders, events, jobs and everything in-between.

Related Articles

Back to top button