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Most pension nest eggs have insufficient reserves

Steve Wilkie
pension strategy

Three quarters of retirees with pension pots have no reserves to see them through a sustained stock market tantrum, according to a survey conducted by retirement specialists Responsible Life. Contributor Steve Wilkie, Managing Director – Responsible Life.

The UK economy could be heading for its worst year for growth in almost a decade as uncertainty over Brexit lingers. That could spell trouble for pensioners because 45 percent of those who have left their pension pot invested rather than buying an annuity with a guaranteed income have no reserves to call on if share prices begin to suffer, a poll of retirees reveals.

Of those pensioners who said they did have other savings and/or investments to turn to during a stock market downturn, 30 percent admitted there wasn’t much in these accounts and these reserves would be used up quickly if they had to rely on them. Nearly two thirds (61 percent) of retirees have kept their personal pension invested, the study shows, and 80 percent of them say they have little choice but to keep drawing from it even if its value plummets.

Recent stock market reverberations mean 95 percent of these pensioners fear for their retirement plans and standard of living if the financial downturn worsens, and more than half (55 percent) now wish they had taken out an annuity. Nearly 9 in 10 (89 percent) use their pension as their main source of income and 40 percent say they would have to reduce the amount they take out of their pension, or stop altogether, if securities drop.

Steve Wilkie, Managing Director of Responsible Life, said: “Retirees who invested their pensions may have seen that approach pay dividends in recent years but the outlook has changed and they are now at the mercy of market forces.

“It means many people with no additional savings who worked hard to save a substantial nest egg face Hobson’s Choice – continue to live off their pension and damage it severely in the process or become a spendthrift. “They are damned if they do, and damned if they don’t.”

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