Shares dropped sharply on Thursday after some weeks of volatility The pension income bought from retirement savings has fallen by 14% compared with the start of the year owing to market turmoil, experts say.The effect of falling share prices and annuity rates means that a 65-year-old's £100,000 pension pot would buy a retirement income that was £926 lower.
The figure, from Hargreaves Lansdown, shows the effect of market turmoil on those with personal pensions in the UK.
Meanwhile, separate figures show how popular shares Isas have also been hit.
An average shares Individual Savings Account of £10,000 at the start of the year would now be worth £8,778, a 12.2% fall in value, according to financial information service Moneyfacts.
This would only directly affect people who chose to cash in this investment.
'Turned over'The turmoil on the financial markets, especially falling shares values, has particularly affected people who have had money saved in personal pension plans and who are now cashing them in to buy an annual pension, known as an annuity.
John Frary was approaching retirement and faced a tough financial choice Not only have some seen their pots shrink, but the annuity rate - the amount of annual pension they can obtain for any set sum of money - has also fallen too.
John Frary from Bedfordshire, a company director in the motor racing industry, had £108,500 saved in his private pension fund.
But between 6 July and 15 August this year that dropped in value by £7,471 to £101,047.
He particularly wanted to use the pension rules to get 25% of that in tax-fee cash for the benefit of his daughters, while buying a pension with the rest.
The fall in his fund values meant that instead of a lump sum of £29,000 he only got £26,500, with a monthly pension of £420.
"That money had just gone in two or three weeks due to a very sharp downturn in a very short period of time," he said.
"That affected me very badly in just a few weeks. I did not want to lose any more so it was time to cash in."
Continue reading the main storyThose approaching retirement at the moment will find themselves between a rock and hard place”End Quote Billy Burrows Better Retirement Group The most recent falls show that waiting another month or so could have pushed down his retirement income even more.
The experience has made him question the whole idea of pension saving.
"I really would be quite cautious about pensions," he said.
"I mainly put money in bricks and mortar and have done better than many friends who ploughed money into pensions over the years - they have been turned over," he said.
Annuity timingA personal pension pot for a 65-year-old 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, the Hargreaves Lansdown figures show.
The effect on annuities in recent weeks has also been striking, according to financial adviser Billy Burrows, of the Better Retirement Group.
He said that for every £100,000 invested, the annuity income has fallen on average by as much as £360 a year, or 6%, since July 2011.
"Those approaching retirement at the moment will find themselves between a rock and hard place," he said.
"Those who have not seen the value of their pension pots fall over the last few months may wish to bite the bullet and buy an annuity because even though rates have fallen there are still some reasonably good rates around.
"Those who have suffered the double whammy of falling pension pots and falling annuity rates are in a more difficult position and perhaps some type of phased or flexible approach to retirement should be considered."
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