Investors could lose 20% of their pensions due to EU regulations
- 19 June 2012
The retirement income of many investors could decrease by between five and 20 per cent because of new European regulations according to consultancy Deloitte.
New Europe wide rules for insurers could see firms that offer the form of pension income known as an annuity having to hold lower risk assets, generally government bonds and cash rather than corporate bonds.
Because corporate bonds tend to pay a higher yield this means that it will cost insurers more to provide annuities. If you have a pot of money invested in a personal pension or a group personal pension when it comes to translate that into an income it will buy you a lower annuity income.
Deloitte estimates that in the best case this could reduce annuity rates by 5 per cent but might lead to a fall of up to 20 per cent. For a pensioner with a £100,000 pension fund, these changes could reduce their income by between £300 and £1,100 a year. The extent of any fall could depend on some complex negotiations.
- Dear future British Government, "We'll build £30bn worth of new homes to rent, if you give us the right environment"
- We've underestimated life expectancy, study warns
- Pension freedoms could leave divorcees out of pocket
- Church of England goes green: plans to sell fossil fuel investments
- Lloyds takes £660m hit from TSB sale
- Rising life expectancy means you need to keep testing your financial plans
- Heating vs health: 15,000 died from cold homes last winter
- Co-op Bank launches best two-year mortgage on the market
- Does the bond market tantrum signal the end of the bond bull run?
- How will the general election influence the currency market?