Falling Annuity rates help push up retirement age


According to new figures release by the Office for National Statistics (ONS) the average retirement age has risen over the past few years.

The report shows that between 2004 and 2010 the average retirement age for men rose from 63.8 years to 64.6 year. For women the jump was larger, from 61.2 years to 62.3.

This trend is expected to continue as the state pension age increases, pension fund values remain volatile and Annuity rates drop.

Later retirement

There are a number of reasons why the average retirement age is increasing.

The state pension age is rising, particularly for women, which in turn is forcing retirees without a personal or work based pension to continue to work longer.

Lower Annuity rates, as a result of increased longevity and falling gilt yields, may also be playing a part. Any pension Annuity calculator  will show how far Annuity rates have fallen over the past couple of years. With pension funds providing less income some people will defer retirement until they have built up a larger fund or in the hope that Annuity rates will have risen.

Most pension funds, whether work based or personal, have some exposure to stocks and shares. The volatility seen on the world’s stockmarkets over the past few years, especially since the credit crunch of 2007, will have reduced many retirees funds. Smaller pension pots combined with falling Annuity rates is a recipe for lower incomes or for retiring later when retirees will hope that things have got better.

A healthy retirement

The figures showed that because of the rise in state pension age, life expectancy in retirement will drop during the course of this decade from 28 to 24 years.

According to the report men and women who retire at age 65 can expect to spend 56% and 57% respectively of their retirement in good health.

Part time working

The combination of the rise in state pension age, volatility in pension values and falling Annuity rates seems to be forcing people to work longer or take on part time work to help make ends meet.

The report said that 3.6% of women at or over the state pension age had continued in full time work whilst a further 8.9% were working part time. When it came to men of the same age 7.3% were working part time whilst 4.6% had full time jobs.

Reacting to the figures the Joanne Segars, of the National Association of Pension Funds, said: “We are all living longer so it is logical that we will have to spend more time at work. These figures show that clocking on for longer is becoming part of our way of thinking. But that doesn’t mean the end of retirement – people should not have to work until they drop.”

Seagers continured: “Some people are choosing to work longer, but more and more find themselves stuck at work because their savings and pension are inadequate. They get a shock when they find they have to keep working while their friends retire.”

“The key problem is that our society isn’t putting enough aside for its older age. We need to get more people saving for their retirement, and to encourage them to start as early as possible. The state pension is also in need of urgent reform and we need a much simpler and more generous system.”

Planning your retirement

Financial experts recommend planning your retirement carefully, however it is clear that many would be retirees have found the changes to the state pension age hard to cope with and have simply decided to carry on working until they can afford to retire.

Using an online pension Annuity calculator will help retirees to see the income they will be able to get from their pension pot, however this is only half the story. A state pension forecast should also be done and projections obtained from other pensions, for example final salary schemes.