Investors buying a level annuity with a pension fund of £80,000 will spend their entire monthly income on basic living costs within seven years of retirement, according to new statistics.
Standard Life researchers have warned that many people could see their retirement income consumed by the basic costs of living as the effect of inflation eats into the money they set aside for retirement.
The FTSE 100 company’s retirement team has warned that investors should seek professional financial advice or risk losing out from inflation, restricting living standards in the future.
‘The cost of living is rising fast for most people in the UK but this can be particularly acute for pensioners.’
Spending habits of pensioners are driven by commodities such as food and fuel bills and these inflation rates are much higher than the overall UK inflation rate. So it is crucial to consider how to protect your buying power in retirement from inflation over a long period of time, which could be 30 years or more.
The reality is that if pensioner inflation remains at around 6 per cent a year, people with a fixed income could lose almost half of their spending power within a ten-year period.
There are many options to consider at retirement that could minimise the impact of inflation on your income – seeking professional financial advice is vital. For more information about how we could help you, please contact us to discuss your requirements.