FT Adviser (19/11/2018) – Lower earners in drawdown pensions are more likely to show signs of depression than those with an annuity, research by think tank Demos has suggested.

According to the findings, published today (19 November), almost one in five lower income earners with drawdown pensions said they have not enjoyed life over the past week. This compares to 9 per cent of those in the same income group who bought an annuity.

These individuals were also more likely to say that they had felt ‘sad’ for much of the past week (22 per cent), compared to retirees who knew exactly what income they would get month-to-month (15 per cent).

For pensioners on more modest incomes, 13 per cent in drawdown said they never felt free to plan for the future, compared to 5 per cent of those with an annuity.

The research, commissioned by Legal & General (L&G) and published in its report Retirement Income Riddle: New perspectives on how we make financial choices and their impact on our wellbeing, explored the emotional impact of retirement decision-making.

The report suggests up to 50,000 pensioners on lower incomes who chose drawdown prior to the pension freedom reforms in 2015 are now finding life more difficult than those with an annuity.

It also notes since the 2015 pension reforms a mere 187,000 people have taken out an annuity, which provides a guaranteed income for life, compared to more than 436,000 drawdown customers.

The research had analysed 1,843 respondents in Wave 7 of of the English Longitudinal Survey of Ageing who had indicated they had an annuity or a drawdown product during 2014 to 2015.

Age UK meanwhile has found people who felt in control of their finances were happier than others.

The charity found the majority of over 65s surveyed felt in control of their day-to-day finances, but 17 per cent were just getting by or finding it difficult to manage their weekly income, rising to 23 per cent for single over 65s.

About 14 per cent of the over 65s surveyed said they were more worried about their financial situation now than this time last year, with one in 12 saying they would find it difficult to pay for an unexpected bill of £200 or to replace an essential item such as a washing machine or cooker.

Alan Chan, director at IFS Wealth & Pensions, said: “There is a correlation between financial control and mental well-being. Most individuals yearn for financial freedom by the time they retire which gives them that peace of mind knowing they do not have to worry about money. If they’re worrying about money every day and struggling to get food on the table, it’s going to have an adverse impact on their mental state.

“A large part of an adviser’s role is help clients take greater control of their finances so that they can get on with living instead of worrying. So regular contact and reviews with their adviser to keep updated will help reassure them that they are on top of their finances.”

Full article link: https://www.ftadviser.com/pensions/2018/11/19/drawdown-pensioners-are-less-happy/