PENSIONS CRISIS: Market chaos could wipe out TEN YEARS of retirement income

PENSIONERS who retired last year are at risk of losing a decade's worth of retirement income as a result of market chaos, experts have warned.

Retirees who put their cash into income drawdown plans at the start of last year could have already seen around two years of income wiped, according to pension provide Aegon.

The schemes allow customers to pull off an income while their savings remain invested, but turbulent markets have significantly dented values, found research.

Those who haven't adjusted how much cash they draw off could find their pots run out of money two years earlier than estimated.

And if volatility continues pensioners could easily erode 10 years worth of income, Aegon has calculated.

This is because the amount of income that was thought 'safe' to take at the start of last year has significantly reduced thanks to lowered investment values.

London's top stock market the FTSE 100, where the majority of British pension savings are invested, is around 12 per cent lower than this time last year.

Anyone taking more than the recommended amount of income could quickly erode the underlying value of their nest egg.

Aegon estimated a 65-year old who retired in April 2015 with £250,000 in savings could have been advised to take an income at a rate of 2.53 per cent, equivalent to £6,325 a year.

But this would now be adjusted down to 2.44 per cent, or £6,092, to make sure the pot will last at least 30 years.

Barry Cudmore, Aegon’s guarantee solutions spokesperson, said: “It’s absolutely vital that people have a grasp of the impact that the markets can have on retirees’ income levels and their chances of running out of income later in life."

Pensioners with income drawdown polices have now been urged to re-evaluate the value of their investments and how much income they can safely draw.

Anyone unsure of their options should consider taking professional and regulated advice.

The Government also offers free guidance with the Pension Wise service.

Mr Cudmore added: "Education is key. Advisers have a really important role to play in helping people understand their options at retirement whether they choose drawdown or a guaranteed option.

"For those who want flexibility and to keep their money invested but don’t want to be exposed to the downside risks of market exposure, there are solutions available that lessen the need for constant income adjustments."