Kamis, 31 Mei 2012

Pension incomes slashed in half in crippling eurozone crisis fallout

Pension incomes slashed in half in crippling eurozone crisis fallout

By Dan Hyde

PUBLISHED: 11:10 EST, 31 May 2012 | UPDATED: 11:10 EST, 31 May 2012


Thousands of pensioners must brace for their incomes to be slashed by half this summer in yet another crippling fallout from the eurozone crisis.

Some retired savers who have kept their pension invested in the stock market will see the money they can withdraw from their pot reduced by 55 per cent at a stroke.

It means a £2,000 a month income could be slashed to just £900 overnight.

Cut in half: pensioners could see dramatic reductions in their drawdown payments

Cut in half: pensioners could see dramatic reductions in their drawdown payments

The huge blow awaits those who retired in 2007 and opted to steer clear of annuities, which convert a pension pot into a fixed monthly income.

The alternative â€" called pension drawdown â€" allows money to be withdrawn in dribs and drabs from a pension pot every month.

But it is subject to a strict cap, which is about to be lowered drastically for pensioners who retired in 2007, in a compulsory five-year review with their financial adviser.

Andrew Tully, of pension company MGM Advantage, says: ‘Customers face the prospect of dealing with a huge hit on their income. 

‘Those reaching reviews soon are likely to be the worst hit as rates peaked in July 2007.’

The drawdown cap is calculated using the returns on Government bonds, called gilts.

Over the last few years, the crisis in the eurozone and the Bank of England’s £375 billion money-printing bonanza (called quantitative easing) have hammered so-called gilt returns.

As Greece has edged closer to exiting the euro, threatening to de-stabilise the whole single currency, Britain has a safe haven for investors.

This has seen the popularity of UK government bonds soar, but pushed the returns or ‘yield’ lower.

Rates hit 2.5 per cent in May, a historic low. They are likely to remain low until there is a resolution to the eurozone turmoil, experts say.

It is bad news for 2007 retirees who enjoyed 5.25 per cent gilt rates when they stopped working. They now face their income dropping by more than half simply because the money markets have turned against them.

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44, working full time. Not putting anything away for a pension. Not for the want of trying but several redundancies throughout my career, meant that on all the company schemes I have joined have either been frozen and worth nothing or my part of the investment minus tax returned to me which in the last instance was less than a grand. Worried yes. Wanting to restart one now?. Not likely as its clear that Pensions (like ALL banking 'products' in general) CANNOT be trusted!

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lol growth...what growth..... not in this Parliaments lifetime. Another section of society screwed over a barrel backwards. This time next year King will be sunning himself on a Caribbean Island without a care in the world and a nice index inflation linked pension paid for by the minions.

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