Workers 'ignorant about pensions'
Updated on 17 November 2008
Nearly half of workers nearing retirement have no idea how much income their company pension pot will generate, a survey showed.
Around 44% of people who are planning to retire within the next five years admitted they did not know what their annual income from a defined contribution scheme would be.
A third of people saving for their retirement through a personal pension were also in the dark, according to financial services group MetLife Europe. People with defined contribution or personal pensions typically use their savings pot to buy an annuity, which provides them with an income for the rest of their life.
But even among people who thought they knew how much income their pension pot would generate, many were overestimating the size of the annuity it would buy.
One in five people retiring in the next five years thought a £100,000 pension fund would buy an annual income of £9,000 or more, while 3% thought it would provide one of over £15,000.
But in reality a pension pot of £100,000 would buy an annual income of around £7,737 for a 65-year-old man and £6,708 for a 60-year old woman, assuming the money did not rise in line with inflation and did not include benefits for spouses.
The situation is set to get worse, with annuity rates expected to fall as the Bank of England cuts the base rate further and stock markets continue to be volatile.
Dominic Grinstead, strategic development and marketing director at MetLife, said: "People who are five years from retirement should be starting to think about their retirement income and ought to have a reasonably clear idea of what that income will be.
"However, given current stock market volatility and the worldwide financial uncertainty people can perhaps be excused for not knowing. The sad reality is that people who expect their £100,000 pension pot to provide an income of £9,000 or more are heading for severe disappointment."
Research Plus questioned 1,001 people aged between 55 and 63 online between September 29 and October 2.
These news feeds are provided by an independent third party and Channel 4 is not responsible or liable to you for the same.
