Falling pension incomes and the rising cost of living have led to a rise in the number of older people selling their homes and moving into rental properties in order to fund their retirement, according to latest research.
John Boyle, managing director of HomeLet, said: "Pensioners are already feeling the pinch with the spiralling costs of fuel, energy bills and basic food. Combined with a reduction in income, old people are increasingly struggling to pay to live through their retirement. This suggests the number of pensioners having to sell their home to move into rented properties could increase even more over the coming years."
The closure of final salary-based pensions and the shift to ones dependent on the stockmarket means this week's falls are more painful than ever for millions of workers. Employers rushed to close down traditional company schemes where pensions are linked to final salaries, replacing them with riskier plans which depend on the stock market. Falling markets sent annuity rates to rock-bottom lows. Annuity rates determine how much pension income you get in return for the money you saved during your lifetime, so this means pensioners retiring today will see a lower income.
Top company directors are topping up their pensions with cash, leaving many having retirement payments up to 29 times more than the rest of the workforce, a study for the High Pay Commission has claimed. It found that executives in FTSE 100 firms received average annual pensions worth around £175,000. The average FTSE 100 director has amassed a pension nest-egg worth £3.6million. High earners are allowed to hold up to £1.8million tax-free in a pension fund. And, as if these giant sums were not enough, almost a third of executives are supplemented with additional cash payments averaging £161,000 – because they have filled their pension pots beyond the maximum allowed under generous tax relief rules.
Chief executives retiring this year include:
Eric Daniels, of state-backed Lloyds Banking Group, who leaves the bank aged 60 with a pension worth more than £5million after just ten years’ service. This equates to £210,000 a year for life.
John Varley retired as chief executive of Barclays this year at the age of 54 after 28 years’ service with a staggering £18.2million pension cache. This yields him an income of £645,000 a year.
The annual median pension from a private sector final salary pension averages £5,860 for the rest of the workforce, according pay analysts Incomes Data Services
Over 97 per cent of executive directors in FTSE 350 companies have company-sponsored pension arrangements, compared with a third of private sector employees.
Deborah Hargreaves, chairman of the High Pay Commission, said: “Companies are increasingly paying their executives generous cash supplements instead of pensions to get round restrictions on tax relief introduced in the last few years. Directors are receiving gold-plated pensions while retirement provision for the workforce has been slashed...Directors are receiving gold-plated pensions while retirement provision for the workforce has been slashed. It seems as ever it is one rule for the workforce as it is exhorted to put up with a poorer retirement so companies can stay competitive, and another for the boardroom."
While the bosses of some of the UK’s biggest companies have been very good at reducing their costs by cutting the pensions of their workforce, they have also been very good at protecting their own!