Pension providers are giving a retirement health and wealth warning after a study revealed millions of pensioners are hit by major life changes in the first five years after giving up work.
Almost a third (31%) say their health worsened, with 10% confirming doctors diagnosed they were suffering from a serious illness.
More than a quarter (26%) impacted on their wealth by doling out cash to help their families, moving house (19%) or renovating their homes (24%).
Far from relaxing in retirement, many find their first five years more of a strain than working, said Vanessa Owen of LV=, the firm compiling the research.
Financial flexibility
“Financial flexibility is important during this time,” she said. “One important point is realising is buying an annuity straight away fixes your retirement income when many could do with more give in the early years.
“If our figures are reflected across all retirees, they could gain extra income from an enhanced annuity if they invested their pension pots after an illness was diagnosed.”
Owen went on to point out that thousands of people reach retirement age every week with plans and expectations that seem to change beyond recognition within five years.
“They need to have a good look at their retirement income options and should not just accept the first offer from their pension provider. Changing health circumstances could mean a bigger annuity income,” she said.
“Speak to a professional IFA to find out the different ways of structuring retirement income to suit what you need to spend and when.”
Pension shortfall
Meanwhile, the Bank of England governor has given retirement savers little to cheer with his announcement that interest rates will stay low until 750,000 new jobs are created.
At the current rate of around 30,000 new jobs a month offered in the UK, unless the economy rebounds significantly, the target could take years to reach.
The result is higher inflation and repressed interest rates all biting into retirement income.
Axa Wealth claims the current savings shortfall for over 55s is almost £8,000 a year below what is required to pay their expected pension.
Lifestyle changes within the first five years of retirement
| A grandchild was born |
38% |
| Worsening health |
31% |
| Needing to help family members financially |
26% |
| Carrying out significant work to property/garden |
24% |
| Moved house |
19% |
| Received an inheritance |
10% |
| Diagnosed with a serious illness |
10% |
| Widowed/bereaved (partner) |
4% |
| Returned to work |
3% |
| Relocated to another country |
2% |
About John Cassidy
