Inflation greatest pension risk, expert warns

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Financial Services > Pensions > News

Inflation greatest pension risk, expert warns

Fri, 25 Aug 2006

Inflation is the greatest risk facing UK residents dependent on a pension after reaching retirement, an expert has claimed.

Pension annuity funds, which have recently proved popular, will not grow in line with inflation, possibly leaving Britons out of pocket after reaching retirement, Prudential warned.

The company cites recent research which indicated that households reliant on a pension have seen an average rise of one third in the cost of goods and services they purchase.

Aston Goodey, head of retirement income at the pension provider, commented: "Retirees don’t realise the impact that even modest changes in levels of inflation will have on the purchasing power of their income and therefore it is important to seek independent advice before choosing an annuity.

"Getting it right could mean the difference between a retirement where you watch every penny to one where you can do the things you want. Ignoring the effect of even modest inflation can have an irreversible effect on retirement income."

Mr Goodey added that securing a lifetime income in retirement is vital, as one in four 65-year old men will live into their 90s.

Recent reforms to the state pension mean that many UK residents will work until 68 in the future.

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