Most pension savers don't know where they invest
More than one in seven people approaching retirement do not know how their pension fund is invested or how it is performing, according to a survey of Axa Life Invest customers.
Just under 40% of current pensioners said they did not start saving towards their retirement until the age of 40 and one in five said they had been caught out by lower than expected annuity rates.
Indeed, 10% found that their retirement income was significantly less than expected.
Additionally, among those who had already retired, a quarter had seen a drop in their standard of living in retirement and one in four of that group had cut back on essentials such as food and heating.
However, among those yet to retire in their 50s and 60s, 43% told Axa they think they will spend most of their retirement income on holidays, entertainment and leisure after the age of 75.
Simon Smallcombe, UK managing director for AXA Life Invest, said: "Too many pensioners have been caught out by rock-bottom annuity rates. But this shock to the system is avoidable. It pays to start planning early - 10 to five years before your retirement, not six months."
In exchange for any lump sum – usually your pension fund – an annuity is “bought” from an insurance company and provides an income for life. When you die, the income stops. Annuity rates fluctuate daily and depend on your sex (although from 21 December 2012 insurers will no longer be able to use gender as a factor when calculating annuities), age, health and a number of other factors, so you have to pick the right one and, once bought, its terms cannot be altered, so seek financial advice.