One in 10 of those due to retire this year will delay taking their pension, as a combination of plummeting annuity rates and poor investment returns means thousands cannot afford to go into retirement.

While a third of those delaying their retirement said it was because they were not ready to quit work yet, the overwhelming majority said they were forced into this position due to their financial situation.

This survey, by the Prudential, comes after annuity rates fell to new lows in recent weeks and concerns that another bout of quantitative easing, as well as fears that new EU rules will push rates still lower.

Twenty years ago a 65-year old man retiring with a £100,000 pension fund would have been able to secure a guaranteed income of over £15,000 a year. Today, with annuity rates at less than 6pc, the same pension fund buys less than £6,000 a year.

At the same time those approaching retirement have been hit with a decade of poor investment returns, while many company’s have scaled back workplace pensions.

However, despite these problems this research showed that early retirement was an aspiration for many, and those “delaying” were often aiming to leave the workforce at 60 unless they need some senior care – rather than being forced to work into their 70s.

Vince Smith-Hughes, a retirement expert at Prudential, said that the notion of retiring at 60 “was not an entirely outdated idea”. The fact that many of today’s retirees are still planning to leave at this age suggests that the” golden era of retirement for baby boomers isn’t over yet.”

“It’s likely that many of these people will have accumulated benefits in final salary pension schemes that generate an acceptable income in retirement,” he added.

“It is, however, undeniable that there is a new retirement reality for a significant number of retirees. People are living longer, and for many, the very real prospect of a thirty year retirement is either unpalatable or unaffordable, hence the decision by many to continue to work. Retirement is also becoming a more opaque concept, with many people working part-time, either out of necessity or desire.”

Many retirement experts urge individuals to take a more flexible approach to retirement. Billy Burrows, of the advisers Better Retirement Group said this didn’t just apply to moving from full-time to part-time work, before complete retirement, but it also applied to people’s financial options.

Previously most people used their pension fund to buy one guaranteed annuity that paid a fixed income for life.

With rates so low he recommended that those with larger pension funds diversify, splitting their assets between conventional annuities, fixed-term annuities and investment-linked products, that offer some protection against inflation.

Inflation figures published yesterday showed that there had been a slowdown in the rate at which prices are rising. However given energy, petrol and food costs are still rising faster than headline inflation figures, most pensioners experience a far higher rate of inflation than those in other age groups as they spend more of this income on these essential items.

A report published by the National Association of Pension Funds last week argued that “murky pricing” and “sharp practices” in the insurance industry meant many people were failing to secure the best annuity rate.

Mr Smith-Hughes added: “To stand the best chance of having a comfortable retirement, which starts when you want it to, it’s important to seek professional financial advice on saving for a pension and on what post-work income options are available. Saving as much as you can as early as you can will help you to gain more control over your retirement.”

Source : The Telegraph

By Emma Simon