Impoverished retirement for millions of UK pensioners 
(22/06/2010)
According to new figures from Partnership millions of pensioners will have to live on less than £10k per year – and the pensions' giants are not helping, warns specialist provider.
Key findings:
1. 89 % of all personal pension funds are under £50k
2. 77% of all annuity transactions for sub-£30k funds
3. 23% of pensioners face abject poverty according to Partnership
4. Just 10% taking advantage of enhanced option
5. Majority of people still ignorant of open market option
Compelling evidence that the majority of the UK’s over-50s population is headed for an impoverished retirement is revealed in new research by Partnership. According to the retirement solutions specialists, over the past six years – from 2004 up to and including 2009, the latest date for available data – the vast majority, 89%, of all annuity transactions have been for funds under £50,000. And over the same period in the past six years at least 77% of all annuity transactions have been for funds under £30,000.
“The figures demonstrate that, put simply, people are not investing anywhere near enough for their retirement years,” said Philip Brown, Partnership’s Head of Retirement Products. “The data – which is sourced from the Association of British Insurers and is therefore highly accurate – reveals that barely one in ten people have a non-State pension pot of over £50,000.
“And with well over two thirds of all of those in the post 50 age group having less than £30,000 in an annuity – which at today’s rates would typically give an annual income of just £2,000 a year, or £40 a week, the burden on an already heavily stretched State is going to be massive,” added Brown.
The current State pension is typically £97.65 per week for a single person, and £156.15 per week for a married couple.
“Put simply, our figures show that most average men and women retiring in the UK today can look forward to a State pension of under £6,000 per year, plus a private pension of around £2,000 a year.
“Today’s average wage for men and women is hovering around £26,000 (source: Office of National Statistics, May 2010), so in other words they will be obliged to live on a reduction in income of up to 70% when they stop work” warned Brown.
Research conducted for PICA (by think tank Oxford Economics and the ONS) reveals that 23% of pensioners – or 2.5 million people – now officially live out an impoverished retirement. The huge majority of those in retirement (red bars) are at or near the bottom of the disposable income bracket.
And the situation will deteriorate further unless more people make the appropriate savings and annuity choices open to them: the number of 65 year olds in the UK is set to increase from 9.9 million now to 15.5 million by 2030 (source: ONS, May 2010).
Partnership’s data has also revealed that the numbers of internal annuity transactions accounted for 62% of all annuities in 2009.
“In other words, the majority of people are not bothering to look outside of their pension provider for the best annuity deal on the market,” said Brown. “These customers are far less likely to have access to ‘enhanced’ annuities which pay out more for specific medical conditions (just 0.5% of internal annuities are enhanced). Our research points to the fact that 40% of the population could qualify for enhanced annuities, which could increase their retirement income significantly”.
“Our graphic demonstrates the stark reality, that just 10 % of all annuities sold in the UK are enhanced – which effectively means that millions of people are denying themselves a higher income in retirement. This suggests failure in the market, including access to advice and the complexity of the customer journey.”
“And in 2009 only 38% of annuities were transacted using the ‘open market option’ (OMO) despite the OMO being around for over 30 years now – it looks as if the big pensions and life firms are getting it all their own way,” added Brown.
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