You are here: Home - Retirement - Retiring now - News -

Pension incomes have HALVED in just a decade

Written by: Paloma Kubiak
Today’s retirees will receive nearly half the pension income of their counterparts who retired just before the financial crash of 2007.

Pension incomes are being squeezed due to real-terms fall in wages, lower market returns and lower returns on annuities that pay a guaranteed income for life in the decade after the credit crunch.

The analysis by Fidelity International revealed that people retiring today must cope with a pension income which is 46% lower than levels seen 10 years ago.

It modelled the outcomes of someone retiring today who in 2007 still had ten years of work and saving ahead of them. At the end of that period in 2017, their pension pot was used to buy an annuity at current market rates. These results were then compared to the figures achieved in the preceding 10-year period from 1997 to 2007.

The results show that those retiring now have suffered significantly compared to their counterparts retiring a decade previously.

On average, people retiring in 2007 earned wages which maintained their buying power, tracking 0.9 percentage points above Consumer Price Inflation (CPI). Meanwhile those in 2017 experienced the opposite with wage growth running at 1.7% against CPI of 2.7% – a full percentage point under inflation, effectively making them poorer, Fidelity said.

Lower earnings mean lower pension contributions with those retiring in 2017 paying in around £5,179 less over ten years as a consequence. Its calculations showed these people have a pot only three quarters the size of pre-crisis retirees –  £139,110 vs £180,106 – and with only 46% of the buying power when securing guaranteed income.


Ed Monk, associate director at personal investing for Fidelity International, said: “This all makes grim reading for the 2017 cohort of retirees yet it’s important not to abandon hope. In the period since the crisis the pension freedoms reforms have freed many more people to access their pension pot using drawdown instead of an annuity.

“This comes with greater risk but at least provides an alternative to being locked into low paying annuities and gives you greater flexibility over how you manage your income. For those still with some years to go before they retire, there’s a chance to make more of the time available left to save.”

Monk added that savers should take advantage of any employer contributions on offer , as well as ensuring that the pension money is invested to take a level of risk individual savers are comfortable with, but that will give the saver a chance of decent growth.

There are 0 Comment(s)

If you wish to comment without signing in, click your cursor in the top box and tick the 'Sign in as a guest' box at the bottom.

Are you a first-time buyer looking for a mortgage?

Look no further, get the help you need by searching for your perfect mortgage

Insurance Experts: Are you fully insured? Click here to get a quote.

For a free quote or to speak with an insurance expert call 0800 1218744

Windfall for Equitable Life policyholders as it plans closure

Equitable Life has announced a ‘new strategy’ as it plans to close in 2019, which should give policyholders an...

Top 10 tips to save over £800 on a week’s car hire

Hiring a car should be a simple process, but for many it’s fraught with surprise extra costs at the rental des...

Leasehold homeowners trapped in unsellable homes

Many new-build leasehold homeowners in England have been trapped paying ground rent fees that rise at an alarm...

Ryanair jetting towards US flights for £10

Ryanair is on course to achieve its long-held ambition of offering transatlantic flights to the US – and the...

Investing in car parks: a good vehicle for income seekers?

As the search for income continues, many investors are turning to alternatives, with car parks becoming increa...

Tesco expected to post significant write-offs

Tesco is predicted to unveil the biggest loss in its 100-year history, according to analysts.

Results round-up: Companies to watch this week

Mulberry and more will face the music this week.

Product launches of the week

Select Property Group, Schroders, Leeds Building Society and more have exciting news this week. Awards 2018

Now in their 21st year, our awards recognise the companies offering the best products and services to consumers

Money Tips of the Week

Read previous post:
Stagnant housing market hurting first-time buyers

Lloyds Bank has warned of a ‘stagnant’ housing market, after its Homemover Review found the number of homeowners moving house...