In a recent Age Concern survey, a massive 60% of people said the recession will force them into working longer than originally planned. This is quite shocking given that this survey took place in a western country where pension contributions are usually deducted from pay and then supplemented by employer contributions and tax rebates. However, whilst shocking, this news isn't really surprising given that many savers have seen the value of their pension fund collapse as the economy falters.

What’s more, this figure is likely to be even higher amongst expatriates, many of whom forget about pension contributions whilst they are working overseas.

And while, in an ideal world, you probably want to stop working at the earliest opportunity, delaying retirement doesn't have to be as disastrous as it seems. Whilst working beyond 65 may seem like a grim prospect, in the present financial climate it could actually be good for your finances.

Shorter retirement equals more income
In principle, if you put off taking benefits from your pension for a time, it should provide you with a higher level of income when you eventually start drawing it. What's more, if you continue to pay contributions into your pension fund during these extra working years, you could significantly boost the value of your scheme.

Stock market recovery
The stock market has had a pretty rough ride lately. In fact, many of the worlds’ indices have generated under 2% annual growth over the last decade. If your pension is heavily invested in equities, it’s likely its value has dropped off significantly.

But, once this financial crisis and the recession are over, shares prices will begin to climb. So, there's a strong argument for delaying retirement to allow the value of your pension to recover. This, in turn, will provide you with a better income in retirement.

Of course, this comes with one important caveat: no one knows what's going to happen to share prices in the future. Most are confident prices will go up, but this could be wrong. So you'd obviously be taking a risk: the stock market could deteriorate further between now and your eventual retirement and you could find the value of your pension has fallen even further.

In other words, staying in shares is a gamble. If you're uncomfortable with that, you could consider moving your pension fund into lower risk assets such as fixed-interest gilts (government debt) and corporate bonds (company debt), or cash. Although, it's probably a good idea to consult an independent financial adviser, such as Candour Consultancy, before carrying out a major overhaul of your pension investments.

Higher retirement income
It's been swing and roundabouts for annuity rates too. An annuity converts your pension fund into an income for life when you retire. Quite simply, a higher annuity rate equals more income. And, luckily, annuity rates increase as you get older.

Annuity rates are higher for older people to compensate for paying out income over a shorter period. Since there are fewer years left until you reach average life expectancy, you'll benefit from a more generous rate.

For example a man, age 65, could get an annuity rate of 7.22% if he chose today's most competitive standard annuity. This means a pension pot of say, $50,000 would payout an annual income of $3,610. But, if he delayed buying the annuity until he reached 70, the rate would shoot up to 8.33%. This would give him an annual income of $4,165, and make him $555 a year better off.

In this example, we have assumed the pension pot stays constant at $50,000, but if there was some capital growth over the five-year period, the annuity income could be even higher.

Remember, because you don't take benefits until you reach 70, you'll have sacrificed annuity income during the five years you delay retirement. You're unlikely to make up this amount even by taking a higher annuity rate later in life, although - as you're working - your finances will benefit from your ongoing salary instead.

Annuity rates and the economy

As well as your age, annuity rates are also based on prevailing interest rates and the yields on gilts and corporate bonds. In the beginning the credit crunch was good for your pension, giving annuity rates a temporary boost as bond yields rose sharply.  But as interest rates fell, annuity rates were dragged down too. Even worse, quantitative easing - or printing money as it is more commonly known - proved to be bad news for pensioners. It forced gilt yields to drop, reducing annuity rates even further.

There has been downward pressure on annuity rates for quite some time. But, in simple terms, when interest rates start to rise again - which is inevitable at some point given that the base rate is already as low as it's ever likely to get - annuity rates should improve too. But, again, we have no way of telling how quickly - or indeed slowly - interest rates will climb over the next few years, or the impact it will have on annuity rates.

If the government decides to print more money to lift the economy out of the doldrums, we could be in for a period of higher inflation and interest rates, which means holding off before buying an annuity may be to your advantage if annuity rates rise.

Of course, there is a simple way to minimise the possibility of having to delay retirement; simply save as much as you can towards retirement now.

Candour Consultancy are authorised representatives of all the major offshore pension providers and can advise on the most suitable product for your personal circumstances.

To speak to one of our fully qualified consultants, simply click here or call us on +971 4 312 4410.