Retirees Risking 'Income Burn-Out'

New retirees in Britain are being warned that many are facing 'income burnout', with nearly half of those nearing retirement expecting to supplement their pension income with other savings.

A report by Fidelity International suggests that nine out of ten workers are using all of their savings up before their death, with many exhausting savings early in their retirement because they have not planned their income carefully enough.

The study estimates that 70 per cent of people over the age of 55 who have not yet retired have no idea about the amount they might withdraw from savings to top up their pension and many of the remaining have calculated that they will be forced to dip into savings when they retire.

The report, Improving Britain's Retirement Income, recommends that, with many people facing up to 35 years as pensioners, retirees must be better informed about the rate at which they dip into capital and savings in order to avoid facing poverty and reliance on the state in old age.

Simon Fraser, president of institutional business at Fidelity International, said: "People approaching retirement have yet to fully grasp the implications of increased longevity. Today's 65 year old has a 50:50 chance of reaching 87-years-old and a couple retiring at 65 face a one in six chance that one of them will live to be 100."

The UK is currently facing a pensions savings crisis, with a growing number of people choosing to turn to non-traditional sources of retirement savings, such as property, ISAs or art, for their future comfort following poor rates of return on pensions products in recent years and the collapse or closure of some funds.

The government is seeking to address the issue with the introduction of a proposed compulsory National Pensions Savings Scheme (NPSS).