Inflation bites

If you're a pensioner retiring this year on a fixed income then you could see up to £10,000 wiped off the value of your pension during the next 20 years.

A report has claimed that for pensioners to maintain a good standard of living, they'd need an income that's twice what they've set aside, according to Prudential.

The report showed that a worker who retires in 2011 with an income of £16,600 will see the value of their fixed income pensions pot fall to £6,700 by 2031 – effectively a drop of £10,000.

The study said that retired people are more vulnerable to the whims of inflation because they, as an age group, tend to spend more on goods subject to the highest rates of inflation, such as food and fuel.

Charles Cotton, an adviser at the Chartered Institute of Personnel and Development, said: 'Both the Government and employers need to take a nuanced approach to communicating pension reforms to employees. With less than a year to go, employee awareness is generally quite low.'

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