Older people who tussle with their finances rather than investing in a guaranteed retirement income are more miserable, says a new survey.
In a twist on the adage that money can’t buy happiness, a lack of cash seems to lead to a more depressing life.
The research by life and pensions giant Legal & General is meant to show that retirement savers who invest their pension pots in annuities are happier than those who must continually manage their funds.
The firm argues that savers without annuities are less able to plan their finances and are less happy with their lives.
The poorest retirement savers are impacted the hardest, says the firm.
Link to health and wellbeing
The inference is how people spend their pensions is linked to their health and wellbeing.
Researchers found one in five had felt sad over the past week, compared with 8% of retirement savers who had an annuity.
They also revealed 13% of older people in pension drawdown did not feel free to plan their finances, compared to 5% with annuities who knew exactly how much money they would get every month.
Statistics show that 436,000 savers have turned to pension drawdown, while the bottom has dropped out of the annuity market. Only 187,000 opted to invest in an annuity.
Before pension freedoms were introduced in April 2015, annuity sales were running at around 350,000 a year. L&G is one of a handful of companies still offering the product.
Duty to customers
“Retirement has entered a new age. Gone are the days of carriage clocks and gold-plated pensions The idea of a one-size-fits-all retirement is an outdated concept and now, for the first time, people face a real choice in how they want to enjoy their pension savings,” said L&G Retail Retirement Income managing director Emma Byron.
“As a sector, we have a duty of care to support customers when it comes to making decisions about income in later life, and we all clearly must do more to engage the public to guide them towards a better retirement.”
Annuities are insurance-backed contracts that offer a guaranteed income for life that are generally purchased with pension savings.