The increasing cost of retirement income

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The cost of securing an income in retirement has increased by almost a third since 2009, statistics from the Office of National Statistics (ONS) have revealed.

According to figures published in April 2013, men will need 29 per cent more savings to reap the retirement income that they could have gained in 2009.

In 2009, a 65 year old man with a £118,000 pension pot at retirement would be able to secure an annual income of £5,000. This year however, the same person would have to have a pot of £152,800.

The cost of securing an income has grown more slowly for women, who would have had to have a pot of £133,500 in 2009 in order to secure a £5,000 yearly income.

The figures represent a dramatic fall in annuity rates in the last four years. If people's expectations and financial plans are set by their historical experiences, without recognition of economic changes, then they are going to find shortfalls in their anticipated retirement funding.

In addition, it is suggested that too many people have sacrificed long-term retirement provision, choosing instead or by necessity, to provide for themselves higher income today.

Inflation proofing or organising pension pot savings has fallen by the wayside, contributing to the growing problem of inadequate retirement income provision and the realisation for many that they will need to work much longer to retirement than they had anticipated.

In the present world economic and increasing life expectancy situation, it is totally unrealistic for us to expect any government to step in and save more for our futures, beyond the provision of any low level safety net. The only way people can fix the problem is for them individually to save more money through adequate pension pot building.