Low-income retirees, financial capability and pension choices: summary

Document type
Summary
Author(s)
Lloyd, James; Lord, Chris
Publisher
Joseph Rowntree Foundation
Date of publication
1 July 2015
Subject(s)
Poverty Alleviation Welfare Benefits and Financial Inclusion, Older Adults
Collection
Social welfare
Material type
Reports

Download (86KB )

Historically, workers with Defined Contribution (DC) pension savings had to convert these savings into a secure income when they retired, i.e. an income that lasts for life. For most, this involved buying an annuity from a life insurance company. Since April 2015, individuals aged 55 and over are able to draw down or cash in as much of their pension savings as they want (although it is subject to income tax). No one is required to buy an annuity, or obtain a guaranteed income from their DC pension savings. The individual effects of these changes to pension options will ultimately depend on the financial capability and decision-making of millions of UK retirees. For those retiring with only limited DC pension savings, the impact of poor financial decision-making could be particularly large.

Research has found evidence of low levels of financial capability which suggests a risk that the April 2015 changes to rules on DC pension savings will result in lower average retirement incomes and increasing pensioner poverty. Financial capability was usually lower among low-income retirees.

Related to Poverty Alleviation Welfare Benefits and Financial Inclusion

Labour's proposed income tax rises for high-income individuals

Briefing note on Labour's proposed income tax rises

Should generations differ in their wealth accumulation

Working paper on wealth accumulation across the generations

Employees earnings since the great recession: the latest picture

Briefing note on changes in earnings over time

More items related to this subject