Low interest rates are killing chances of a decent income in retirement
Some believe that rates are at their lowest for more than 25 years - but Reeves can help
Last month it was reported that annuity rates had plummeted to a 25-year low – however, some believe that interest rates are at their lowest for a much longer time than that. In the 1990s, £100,000 would have bought a 65-year-old an income for life of about £10,000 a year- today it will buy little more than £4,000 a year.
It’s worse than that - those are not inflation-protected annuities. If you want an income that will maintain its value over time, then that £100,000 will buy you an income of somewhat less than £3,000 a year. Essentially, you’ll spend your career scrimping and saving, worrying about the future. To get together a seemingly large pension pot of £500,000, and what you'd currently receive is a pension of less than £15,000 a year.
Lower interest rates have driven the most recent decline. It is also the reason behind the long-term decline, impacted further by the financial crisis in 2008.The consequences of this shift, though, are far more fundamental to our system of pension saving than either government or those of us desperately trying to save for our old age seem to appreciate.
With traditional salary-related occupational schemes becoming scarce outside of the public sector, most of us don’t have a great chance in replicating the comfortable incomes enjoyed by many of today’s retirees.
Astonishing as it may be, the fact is most pensioners today are financially better off than they were during much of their working life. Once you take account of housing costs and the costs of bringing up children, they have a higher disposable income in their late sixties than they had when they were in their forties. Today’s 40-year-old's should not look at their parents’ generation and expect anything remotely similar.
These low interest rates have had an even more fundamental effect on our system of private pension provision, though.
''Despite these tough times, Reeves Independent can help you.''
Of course, at first glance, it makes for grim reading. However, it may not be as bad as it seems. Reeves Independent are experienced financial and retirement advisers. Yes, the facts above are true. But that doesn't mean you can't have a healthy retirement income.
The era of many retiring in their early sixties on a sizeable pension, possibly, will soon be over. In the future, due in part to these low-interest rates, you may have to work beyond 70.
However, no one can predict what the case will be. At Reeves Independent, we don't work on assumptions. We work on tried-and-tested research methods, industry leading communication and recommending regulated products and funds that we believe can get the best potential returns for you. We firmly believe that through proper monitoring and analysis of market movements and trend analysis we can make the right recommendations to yield a better return from your investments.
Through smart decision making and sound recommendations we believe we can set attainable, realistic goals for you - and that you can potentially retire well before 70.
Reeves Independent work hard to make sure we can get the best results for your portfolio.
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This article was taken from The Times, written by Paul Johnson - Director of the Institute for Fiscal Studies. These articles are for information only and are based on specific client circumstances which may be different to yours. No advice should be conferred from the articles. No action should be taken without independent professional financial advice as any actions on your pension may be irrevocable and have a big impact on your income in retirement.