Families lose out as retirees plug pension income gaps

Scottish retirees are setting less money aside for their families as they seek to boost their pension income, a report out today reveals.

Two thirds of Scots retiring this year believe they will be able to leave an inheritance when they die, compared with just 52 per cent across the UK as a whole, according to research by insurance giant Prudential.

But the number of people bequeathing financial legacies when they die - and the amount being left - is set to dwindle further as pension incomes are increasingly squeezed.

While pension savings have recovered some of the losses incurred in the stock market slump, the rates on annuities - used to convert pension funds into regular retirement incomes - are on a long-term downward spiral and inflation continues to wreak havoc with cash savings.

As a result, one in ten people retiring this year say they will cancel their plans to leave money to their families so they can instead boost their own retirement income. Just 67 per cent of Scots are confident that they have sufficient income and assets to fund their retirement and still have enough left for an inheritance.

A quarter of people reaching retirement in 2011 said they already know that they will not be able to afford to leave an inheritance when they die, with a fifth unsure if they have enough money set aside for their retirement.

Gerry Brown, tax and trusts expert at Prudential, said: "Obviously the focus for retired people has to be on their own retirement income and so leaving a financial legacy can become a secondary consideration.

"Our research shows that inheritances are increasingly in the 'nice to do' rather than the 'need to do' box because of uncertainty around being able to afford a comfortable retirement."

The insurer revealed earlier this year that more than three in ten Scots hitting retirement age in 2011 are having to put their retirement plans on hold, the majority because they cannot afford to stop working.