People value a stable income in retirement above all else

People value a stable income in retirement above all else

People value certainty - a stable income they will not outlive - above all else, according to AXA Life Invest.

Almost two-thirds of people approaching retirement stated that they would find it very attractive to know the minimum amount of pension income they would receive up to 10 years in advance of their retirement, while over a third would invest more into their pension if they knew what their guaranteed income was.

The report also found that people can face a nasty shock at retirement, as they discover just how low their retirement income will be. One in five current pensioners surveyed was caught out by lower than expected annuity rates - while one in ten found their retirement income was significantly less than they expected.

A quarter of current pensioners have witnessed a drop in their standard of living in retirement. Of this group, one in four pensioners have had to cut back on essentials such as food and heating.

Meanwhile the next generation of retirees does not appear to be any better prepared for retirement than current pensioners. Over three-quarters of those approaching retirement indicated in our survey that they have no idea what their pension fund is invested in, while a similar proportion do not know how their pension pot is performing.

Many people in their 50s and 60s appear to be burying their heads in the sand: 43% are under the happy delusion that they will spend most of their income on holidays and leisure activities after they reach 75. Only one in ten thinks that the cost of care will make up most of their spending in their golden years.

Simon Smallcombe, UK Managing Director for AXA Life Invest said: "In today's climate of low interest rates, all time low annuity rates and income-stripping quantitative easing, it is clear that traditional solutions no longer meet people's needs. People are crying out for certainty - an income that will last.

"Our report shows that too many pensioners have been caught out by rock-bottom annuity rates. But this shock to the system is avoidable. It pays to start planning early - ten to fifteen years before your retirement date, not six months. The next generation of retirees must resist the urge to accept the first annuity an insurer offers them and make sure they look at all their options.

"Now that responsibility for retirement rests squarely on the shoulders of the individual, policymakers are searching for the new defined benefit. But the 21st century version of defined benefit already exists in the UK, in the form of the unit-linked guarantee. This is the only retirement solution that can tell people exactly how much money they will get every year of their retirement. Financial advisers have a key role to play in going beyond annuities and giving the next generation of pensioners the certainty they crave."

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George Bailey