13th May 2013
Pensioner households have seen investment and savings income slashed by a third since the onset of the financial crisis adding up to a total loss of £4.6 billion, analysis* according to an analysis from Key Retirement Solutions.
The average retired household received around £1,863 – around 10% of their annual income – from investments and savings in 2007/08 before the start of the credit crunch and the Bank of England base rate being cut to 0.5%.
But that has now fallen to £1,207 – a 34% cut. The firm says this equates to a total loss of £4.6 billion across the UK’s 7.151 million retired households. Savings and investments now make up just 5.5% of total income.
KRS says the problem is compounded by low rates for savings – the best instant access savings accounts pay just 1.7% while the best one-year bonds only offer 2.15% and the best instant access cash ISAs around 2.25% .
The ongoing squeeze on annuities is also piling the pressure on people retiring now. The firm says the best annuity rates currently are around 29% lower than in 2008. The payout currently on a typical £100,000 fund is around £5,428 compared with £7,676 in September 2008 when rates were at a five-year high.
The table below outlines the ups and downs of pensioner investment income.
|YEAR||AVERAGE PENSIONER INVESTMENT AND SAVINGS INCOME||TOTAL PENSIONER INVESTMENT AND SAVINGS INCOME||LOSS/GAIN|
|2008/09||£1,352||£9.668 billion||-£3.65 billion|
|2009/10||£931||£6.657 billion||-£6.663 billion|
|2010/11||£1,207||£8.631 billion||-£4.689 billion|
|2011/12||£1,219||£8.717 billion||-£4.6 billion|
Dean Mirfin, Group Director at Key Retirement Solutions (www.keyrs.co.uk), said “Investment and savings income for retired households has been hammered by the ongoing financial crisis and there appears to be little hope of a revival in the near future. The Government’s Funding for Lending Scheme is doing a great job for borrowers but savers are suffering and there is little sign of the Bank of England increasing the base rate in the near future.
“It remains the case though that pensioners generally do have housing wealth and no mortgages and are literally sitting on wealth estimated at £752 billion. In 2012 the amount of pensioner equity released from property wealth grew by 15% over 2011. This is expected to increase again as the squeeze on income continues.”