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Pensioners in danger of “burn-out”, warns new Fidelity research

Nine tenths of workers approaching retirement are in danger of burning through they savings well before they die, according to new pensions research from Fidelity International.

The paper, called “Improving Britain’s Retirement Income”, interviewed 1109 UK adults aged between 55 and 75 in August.

It reveals 70 per cent of people over 55 who have not retired have no idea how much they might withdraw from their savings, while most of the remainder will dip too much into their savings.

Almost half of those approaching retirement expect to supplement their pension income from other forms of savings, such as ISAs, mutual funds and property. Just under a third of these people expect these alternative funds to account for over half of their total income.

Fidelity says its research shows people should not withdraw more than 4 per cent a year from their savings, inflation adjusted, if they want their income level to stand a reasonable chance of keeping pace with inflation for the remainder of their life. But even at this level they could exhaust their savings before they die.

Historical data suggests at a 10 per cent real withdrawal rate, a retiree’s savings could last just eight years.

Fidelity International president of institutional business Simon Fraser says:

“People approaching retirement have yet to fully grasp the implications of increased longevity. People could find themselves in retirement for up to 35 years, almost as long as they spent in their working lives.

“This has huge implications for savings. People need to be much more informed about the rate at which they dip into their capital, otherwise they are in danger of burning through their savings well before they die.”


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