It is an unfortunate fact that the returns people have come to expect from their pensions has fallen considerably over the last decade and as a result many are finding that their pension income will not meet their requirement for income.

This is due to many factors including; poor investment returns, lower rate annuities, an increase in the cost of living, and low interest rates. As a result many are electing to remain working beyond retirement.

It has been suggested that as many as four in ten will work at least part-time in retirement to supplement their pension income.

Whilst this may be achievable for many shortly after retirement, the danger is that the income shortfall will not go away and at some point in the future part-time work will not be achievable. 

Future generations should take note of this statistic and act now at a younger age to ensure that they will have sufficient income at retirement age.  Putting a percentage of your income to one side through pension, savings or ideally both will give a much greater chance of a happy and relaxing retirement.

The government’s new auto enrolling pensions for all employees will at least ensure that everyone has a private pension, but it is up to the individual to ensure they will have enough for their needs at their desired retirement age.  Working beyond retirement to supplement a pension is only a temporary solution, it is not a long-term fix for underfunded pensioners and this issue can only be rectified if it is identified at a younger age and acted upon.

The Financial Advisers at The Money Map offer pre retirement counselling aimed at working out how much of your salary you should put to one side in order to meet your retirement goals.  It is vitally important that you know how much you are due at retirement; it should not come as a shock when it is too late.

The income in the retirement market has evolved a great deal.  People approaching retirement now have a number of options available to them when deciding which route to take to create the most appropriate kind of income.

In days gone by, people who were retirement planning had built up pension funds and only had the option of using their pension provider for an annuity, and they got what they were given. Since the introduction of the Open Market Option in 1975 and other developments such as Income Draw-down in 1995, pensioners have begun to have more flexibility.  However, the increased level of options has also increased the requirement to seek advice.

There is no such thing as a straight forward annuities purchasing. When retirees have decided that an annuity is the most appropriate one for them, they then need to decide the benefits that they want attaching to their retirement income.  This is even before they decide whether a conventional annuity or an investment annuity is the way to go.

The options that can be included on a “basic” annuity can include a level or increasing annuity. Before purchasing an annuity you will need to ask yourself a lot of questions.

 If an annually increasing income is required, how much should it increase by? 

Would you want a set annual increase, would you want an increase by the Retail Price Index (RPI) or would you rather it increased by the Consumer Price Index (CPI)?

Would you want your spouse to benefit from the pension if you predecease them?

Would you want them to have the same level of pension, 2/3rds or half of what you were receiving?

Do you want to build in any guarantees of pension payment, so that the pension does not die with you? 

How long would you like the guarantee to last, 5 years, 10 years? 

Would you like you income paying in advance or are you comfortable receiving the income in arrears?

What impact with any of these options, will there be on the amount of income you receive?

If you know the answers to all the above, you can quite easily purchase your annuity, on your own.  Then, out of the 20 or so annuity providers, you’ll need to assess who is currently offering the best annuity rate.

Pension and Annuity Advice is very important, the Pensions market is evolving all the time and you need to make sure it’s up to date and relevant to you. Everyone is different and at The Money Map we strive to help you find the option that works for you.