Retirement Misery Continues ..

31st July 2012

Quantitative Easing (QE), where the Bank of England increases the amount of money in the economy to aid it has hit pensioners again.

Pensioners planning to draw cash out of their pension funds next week will be offered the worst rates on record. This because QE drives down the gilt yields, which are now, also a record low, indeed has decreased from 4 per cent 3 years ago to 2 per cent now. Gilt yields effect the annual income available to investors who want to keep pension funds invested in “capped drawdown” when they retire.

So this is bad news for pensioners in drawdown, but is worse for existing investors who are approaching their five-year review, where income limits are reset for the next three years.

Those opting for a secure income in the form of an annuity have not been insulated either, with rates on average down 20 per cent since March 2009, when the policy of quantitative easing was launched.

There is some relief for drawdown investors, however, who have been told that rates cannot fall any lower. Government intervention means that gilt yields cannot fall below 2 per cent for drawdown calculations.

It is more important than ever to get advice on this complicated area. An Independent Financial Adviser will be able to take you through the options available to you and may save you a considerable amount of money/future income.

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