This ultimate guide will tell you how will you boost your your pension income and maximise savings.
WORKERS have been warned now could be the worst times in history to make a retirement decision after actions by the Bank of England's actions hammer income prospects.
Retirees who want use pension savings to buy an annuity - which offers regular income for the rest of a buyer's life - are faced with already low payouts that are likely to fall further in the near future, experts have warned.
It comes as Government bond yields, which are linked to annuity incomes, have been pushed to record lows by the central bank's money-printing programme.
At the same time, the core interest rate cut, is set to make it even harder for retirees to live off income from cash savings.
Since the Bank of England cut rates down to 0.25 per cent, a deluge of providers have slashed savings returns.
Steven Cameron, pensions director at Aegon, said: “The further cut in interest rates means now is probably the worst time ever to be making a retirement decision, with those buying an annuity today locking in to super-low returns for life."
It means that savers are likely to turn to so-called income drawdown when retiring.
Under the plans, savings remain invested while retirees take any income that is generated.
Matthew Brown, private client partner at Thomas Miller Investment, said: " The latest rate cuts, along with the high price of gilts, is making annuity purchase a very expensive option.
"While still the right course for many people, especially those with medical or lifestyle factors that can enhance rates, for others drawdown will start to look more and more appealing.
“For retirees planning on using drawdown, a well-balanced investment approach, combining high-quality international and domestic equities, fixed interest bonds and potentially an element of commercial property, is likely to yield far better outcome than cash in the long run. "
It means that savers are likely to turn to so-called income drawdown when retiring.
Under the plans, savings remain invested while retirees take any income that is generated.
Matthew Brown, private client partner at Thomas Miller Investment, said: " The latest rate cuts, along with the high price of gilts, is making annuity purchase a very expensive option.
"While still the right course for many people, especially those with medical or lifestyle factors that can enhance rates, for others drawdown will start to look more and more appealing.
“For retirees planning on using drawdown, a well-balanced investment approach, combining high-quality international and domestic equities, fixed interest bonds and potentially an element of commercial property, is likely to yield far better outcome than cash in the long run. "
It's also important to have flexibility on the amount of income that can be taken and to compare provider charges.
For anyone thinking about income drawdown it can be a good idea to take professional advice.
Mr Brown said: “In a low inflation, low interest rate world returns will be subdued and prudence will be the watchword when considering the right strategy.
"However, over the long term that is retirement, a well-diversified portfolio should beat the low returns we are seeing on cash deposits.
“Expert financial planning, with the support of a professional investment manager, provides the greatest opportunity for success amongst those approaching and in retirement."
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