Increasing longevity will dramatically increase pensioner poverty and contribute to a decline in traditional fixed annuities, according to MGM Advantage, a retirement income specialist.
This comes in response to findings from the UK’s Department of Work and Pensions that today’s 20-year-olds are much more likely to reach 100 years of age than their parents and grandparents.
MGM estimates that the current level of annual household expenditure where the main occupant is aged 75 and over is more than £16,000 (€18,370) so that, if someone lived until they were 100, between their 75th and 100th birthdays, not including inflation, they would need to find around £400,000 to live.
This combined with falling annuity rates means that more pensioners are falling below the poverty line.
Aston Goodey, sales and marketing director and MGM Advantage, said: “As people in retirement look for ways to enhance their income, we expect to see a long-term trend of more choosing investment backed annuities as opposed to conventional fixed term ones.”
“Investment backed annuities give clients the opportunity to grow their income while still giving them the comfort of a minimum income guarantee.”
©2011 funds europe