Over two fifths (41 per cent) of over-50s view the cost-of-living crisis as the main barrier that could prevent them from securing the income they think they’ll need in retirement, according to research from Standard Life.

The survey found that almost half (48 per cent) of those over 50 expect their own financial situation to get worse over the course of the year, while just 16 per cent expect their own personal finances to get better.

Rising prices have already prompted some to take different options at retirement, as the group found that 11 per cent with a DC pension or self-invested personal pension (SIPP) are more likely to purchase an annuity with their pension pot in light of the cost-of-living crisis.

The main reason for this trend towards annuities was a desire for certainty that an income would be guaranteed for life, cited by over a third (38 per cent) of respondents.

Others cited simplicity (34 per cent) as well as security in the knowledge that the amount of income won’t change (32 per cent), while 24 per cent were looking for peace of mind, and 22 per cent viewed it as a good time to purchase annuities given current high rates.

However, the cost-of-living crisis was not the only barrier for savers, as 24 per cent of over-50s raised concerns that changes to the state pension could stop them from securing the income they think they'll need in retirement.

Other barriers cited by over 50’s that might prevent them from securing the income they think they’ll need in retirement included tax rises (17 per cent), performance of the stock market (15 per cent) and retiring early due to ill-health (13 per cent), and not seeking out advice (8 per cent).

Commenting on the findings, Standard Life head of annuities – individual retirement, Pete Cowell, stated: “In a cost-of-living crisis, in which every penny counts, annuities can offer what many people are looking for in retirement – certainty and security, knowing that their money will last as long as they do.

“The income security benefits of annuities are well-known, however with the improvement in annuity rates, which have seen a total increase of 48 per cent since the start of 2022, they also offer a better level of income.

“While annuities can be purchased standalone, it’s also important to bear in mind that they can also work well in combination with other retirement income solutions, such as drawdown.

“People may opt to buy an annuity with a portion of their savings and invest the remainder, which gives people certainty about their ability to meet fixed costs. They can take some risk on the money that remains invested while maintaining flexibility over when and how they access it. Alternatively, buying an annuity at different stages of retirement allows people to benefit from annuity rates, which increase with age.

“Whatever the course of action, a mix and match approach suited to individual circumstances can often be an ideal way to get the best of both worlds – security in the current economic climate, but also flexibility for the future.”

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