Money: 5 Options if you think you can't afford to retire
It seems that there isn’t a day that goes past without there being a negative story about annuity rates or peoples income in retirement. Mintel a market research company has discovered in their report Lifestyles of the over 55s that this is having a real knock on effect on the level of people retiring at retirement age.
According to Mintel just 33% of pensioners retired when they reached state pension age last year, this is a significant drop from the year before where 48% fully retired in 2010.
So if you think that you are one of those 67% who think that they can’t afford to retire what are your options?
5 Options if you can’t (or think you can’t) afford to retire
1) Continue to work in current role
Probably the simplest, most obvious solution but not everyone realises the impact that this can have on your retirement income. Your state pension will increase by 1% for every 5 weeks that you defer claiming your state pension, so if you can delay you retirement by even one or two years you will see a big difference in your income.
2) Part retire / change roles
You may have been planning your retirement out and mentally be ready to stop your current role. You should discus you options with your current employer and see f you can reach an amicable situation where you retain employment with the company but perhaps in a different role or on reduced hours. If you decide that you did want to look for alternative roles there are recruitment companies that do have a specialist over 60 section such as Trovit
3) Shop around for an annuity
Again it seems simple, but often the best solutions are simple. About 70% of people in the UK who take an annuity do so with their pension provider – even the insurance trade body the Association of British Insurers realises that this is too high and have to abide by a new annuity code of conduct.
What this means is that the ABI know that it is in the customers best interest to shop around for the best annuity rate as you can improve your annuity income by up to 40% for the rest of your life just by shopping around different providers, using what’s called your Open Market Option. So where you thought you might not have had enough income to retire on – it might transpire that by shopping around and using your Open Market Option that you do have enough income to retire.
4) Ensure you have tracked down all your pension funds & benefits you entitled to
A job for life no longer exists as such it is unlikely that we will have just one pension fund from one company. If you have been using annuity calculators to obtain annuity quotes to calculate your projected retirement income make sure that the total pension pot that you are using is the total of all your different pension funds. If you have lost or are not sure how to track down a pension use the governments Pension Tracing Service
You’ll probably be entitled to a State pension and possibly some extra benefits. You will have to sign up for these as you won’t receive them automatically. You may also qualify for some welfare benefits such as the winter fuel allowance. Visit www.direct.gov.uk to find out what benefits you qualify for.
5) Use Equity release
Another option to explore is that of Equity Release. The way that Equity Release schemes work is similar to a mortgage – you receive the cash in your bank account and the equity release loan is secured on your house. However, there are some significant differences to a normal mortgage for example you can choose to never make any repayments and instead add them to your initial loan. There are many types of equity release available from ones that pay you a monthly income to ones that can provide you with a large cash sum.
We only recommend providers who are members of the Equity Release trade body The Equity Release Council to find out more about Equity release schemes and to find out how much you could borrow visit our equity release page .