interactive investor comments on DWP pensioners’ income figures

Our Personal Finance Campaigner Myron Jobson gives his take on today's pension income data.

Commenting on the latest pensioners’ income figures, revealed today by the Department of Work and Pensions, Myron Jobson, Personal Finance Campaigner, interactive investor, says: “One of the headline statistics from the report is 69% of pensioners received income from private pensions in the 2018/19 tax year – up 10 percentage points from 59% in 1994/95. 

“This is hardly surprising as many baby boomers who have recently retired have amassed generous defined benefit pensions and benefitted from favourable pension policies such as the state pension triple lock, introduced in 2011.

“However, the decline of defined benefit schemes and the scaling back of state pension provisions means that future generations of pensioners are at risk of receiving a lower income in retirement. 

“The advent of auto-enrolment has certainly helped, adding more than 10 million employees into workplace pensions since its introduction in 2012. Workers are contributing more than ever, following an increase in minimum contribution rates from 5% to 8% in April 2019, with the employee paying 5%. But this might not be enough to continue the trend of growing retirement income.

“There is no getting away from it, workers are now required to sacrifice more of their salary to ensure a comfortable lifestyle retirement and the hard work starts now.”

Moira O’Neill, Head of Personal Finance, interactive investor adds: “While the 2018/19 tax year might have looked benign for many pensioners, it may well be a far less rosy picture after a severe market sell off.  

“Income doesn't always have to be the natural yield, particularly when you're using tax-efficient wrappers such as ISAs and SIPPs. 'Income' can be taken from capital too, but of course that brings the risk that you deplete your capital and run the risk of not making it back. In these tumultuous times, some people may be forced to take income by selling up holdings to generate enough income to cover minimum outgoings.

“There haven’t been many 10-year periods in the stock market when markets haven’t recovered. That’s not to say it couldn’t happen. But, if you’re more than 10 years away from needing your money, then time is at least on your side. This will apply to some extent to those in retirement too – you’re not having to draw all your money out today, only what you need to spend to live.

“If you’re worried about money issues, such as retirement income depleting, and haven’t talked to your family about this, now is the time to do so. As nation, we don’t talk enough about money to friends and family. In these exceptional and tumultuous times, it makes even more sense to have those conversations. You may find solutions that you hadn’t thought of that can put your mind at rest.”