Pensions: ‘baby boomers’ unsure how best to generate income

BlackRock survey reveals people financially unprepared for retirement

Pensions: ‘baby boomers’ unsure how best to generate income

Britain’s baby boomers intend to have more access to their pension, following the reforms coming into effect in April 2015, according to the latest BlackRock Investor Pulse survey.

Following the announcement by the Chancellor in last year’s Budget, individuals with a private pension will no longer be obliged to take out an annuity and can instead withdraw all of their money if desired, bringing more choice than ever before to how people plan and finance their income in retirement.

BlackRock’s survey, based on a sample of 305 British baby boomers (aged between 55-74) during July to August 2014, revealed:The largest number of baby boomers (28%) are undecided about what action they will take

  • 26% will opt to stay invested in their pension plan taking regular withdrawals and use part of it to purchase an annuity
  • Almost one in five (17%) will withdraw all of their pension and invest it elsewhere – 9% will invest it to generate an income and 8% will put it into a cash savings account
  • 6% will use part of their pension to clear debt or spend it on other priorities
  • Just 3% said they would use it all to treat themselves


However the survey, one of the largest of its kind to analyse the savings and investing habits of people around the world, has also found that Britain’s baby boomers, aged between 55–74, are some of the least prepared for their retirement:

  • Outside of a pension, almost two-thirds (63%) of their savings are in cash. Taking inflation into account, they will have seen the value of their savings eroded over the last five years from £1,000 to £853
  • Eight in 10 (81%) say that they do not know how to get the best income generating investments
  • Two in five (40%) have not started to save specifically for retirement despite two-thirds (67%) knowing the state pension will be insufficient to meet their retirement income needs
  • Believe they will need £23,000 per year in household income at retirement, but think the pot they need is £304,000 – in fact it would be £440,600
  • Almost six in 10 (59%) are concerned that they will not live comfortably in retirement

Tony Stenning, head of UK Retail at BlackRock, commented: “The research shows that many (26%) will use the flexibility and choice offered by the pension reforms to stay invested in their pension for longer, allowing their pot to grow while taking regular income and combine purchasing an annuity alongside it, potentially later in life.  Meanwhile, almost one in five baby boomers will take the freedom to invest their money elsewhere, half choosing a cash savings account.  What will be crucial here is to make sure they have the right roadmap ahead of them to generate the income they will need.  The worry is whether they too will gravitate towards the “safety” of a cash savings account, as more than eight in ten admit they don’t know where to go to get the best income generating investments and already two-thirds of their assets are held in cash.

“The survey revealed what advice baby boomers would give to their younger self when it comes to savings and investments and top of their list was to start saving for retirement at a younger age followed by thinking longer term in their investments.

“The government also has a role to play in restoring confidence in the savings and pensions system, the recent reforms have been a good start.   More than half of the people we surveyed said that they would be encouraged to save more if the government provided a stable pensions system that is not changed by successive political parties. It’s vital that we promote the benefits of saving for retirement but we also have to provide a stable and trusted framework in which to do it, one which the nation can really get behind,” added Stenning.

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About Author

Christopher Menon

Every Investor Editor Chris Menon is a financial journalist who has written regularly for national newspapers, magazines and websites about personal finance, with particular emphasis on investing.