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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.

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