Friday, 23 September 2011

Sharp losses for savers and pensioners who depend on shares

The yo-yoing stockmarket is wreaking havoc with the savings of millions of people.

A typical pensioner retiring today on a personal pension will get 14% less than he or she would have received at the beginning of January.

A small investor who had put away money in a tax-free shares ISA has seen the value of the investment drop by 12%.

Figures complied for the BBC today show the impact of gyrating share prices on savers who have hitched their wagon to shares.

A 65 year-old who had saved £100,000 in a personal pension pot would use the money to buy a retirement annuity, a guaranteed income for life.

But the pot has dropped in value to £91,840 since the start of the year. So the prospective annuity income has fallen from £6,497 to £5,571, a cut of 14% in 9 months.

More than 400,000 buy annuities each year.

A saver who held £10,000 in a shares ISA is likely to have seen its value slip to £8,777, based on the average value of unit trusts which invest in a basket of shares.

HMRC tells me that 3.4 million investors subcribed for stocks and shares ISAs last year.

The figures come from pension experts, Hargreaves Lansdown, and the savings information group, Moneyfacts.

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