The average retired household earns around £1,445 a year from savings and investments (not counting pensions), according to research from MetLife.
In total, saving and investment income among retired households is worth around £10.3 billion. That is the equivalent of 6.8 per cent of annual pensioner income. The average retired household makes that money from interest on cash savings and returns on equity-based savings.
But saving and investment income is currently still below the £12.375 billion earned in total in 2007/08, before the financial crisis hit, when average retired households made £1,863.
The slump in investment savings, which has mainly been due to low interest rates, contrasts with the rise in total pensioner income.
Government data shows median retired household incomes, at £21,100, are now £1,800 higher in real terms than at the depths of the recession in 2007/08. That increase is due to better provision from private pensions, according to a MetLife spokesperson.
For wealthier households, whose gross income amounts to £55,480 on average, investment income is more significant. It contributes nearly 22 per cent of total income and is worth around £8,200 annually.
MetLife warns that current volatility and historically low interest rates are maintaining the pressure on retired households and highlighting the case for guarantees on Isas and other share-based investments to maximise income.
Dominic Grinstead, managing director of MetLife UK, says: 'Investment income can make a major contribution to boosting standards of living in retirement, and the £10.3 billion earned a year is substantial.
'But historically low interest rates and continuing volatility have squeezed investment income for retired households, highlighting the need for alternative solutions which can help boost pensioner finances.'
He adds that Isas have a major role to play in planning for retirement. 'There is a need for innovation to provide more certainty and flexibility over income and capital, which is where guaranteed solutions can play a major role.'
Careful research needed
Only 12 per cent of people surveyed who are relatively near to retirement (those aged 55 and over) feel they can rely on state support in the years to come. In contrast, those of a younger age are the most optimistic 'or naïve', with 29 per cent of those aged 25-34 feeling that they will be financially supported by the state.
Research by investment service provider Willis Owen found that only 17 per cent of 55-64 year olds believe they are better off than they were 12 months ago, compared with 40 per cent of 25-34 year olds, who have benefited from wage rises and relatively low costs of living.
This could be the case because market volatility is more acutely felt by older generations with more savings and investments, while continuing low interest rates have minimised income derived from deposit-based accounts.
Liz Rees, head of research at Willis Owen, comments: 'Looking at the year ahead, there are events which could produce further bouts of volatility. There could be bumps in the road ahead for savers and investors. To navigate them successfully, careful research is needed before investing.
'While developed markets may still offer a more stable outlook, investors with a long-term horizon may wish to rebalance their asset allocation slightly towards areas which now look relatively attractive on valuation grounds.'