The truth is no one knows the exact answer and some people will be lucky and others won't. For my 2 pennies worth you can read my recommendations below:
1. As a middle class person if you have a large capital sum of cash from a pension or savings (say 100K-200K) I'd say firstly check how you can lower your fixed costs. Which should be food, mortgage, utilities, council tax and travel. So buy in bulk at the places newsagents buy from - everything is a third cheaper although you have to buy 5/10 of them.
Utilities
For utilities, check if you're house can support solar panels for heating and/or electricity. With prices going up 16% or more a year, spending 10-15K of your money on this would provide you a return outweighing any risky investment as the returns are guaranteed by the government. For solar panels make sure you have a south facing (as far as possible) roof with no shady areas for best results. Ground water heat pumps also provide free heating for an upfront cost. Its worth removing yourself from the crazy fuel inflation we are all facing.
Tax
Check you're in the right council tax band by reviewing similar houses in your area on the UK Valuation Office Website
Travel
Get your freedom pass to travel on local transport for free after 930am and walk a little more (if you're in london try www.londonwalks.com which are quite entertaining)
Mortgage
If you have a large mortgage consider trading down to a smaller property. If you don't have a mortgage maybe you don't need the space any more and you could sell giving you extra income for the future.
2. For zero risk for some of your money you can invest in inflation linked Gilts (UK government debt). From time to time the government issues these and its worth taking as a older person looking to protect savings rather than a normal savings account at a bank. Look the the post office website to see how to get them.
3. Make your income last further by travelling to countries with a lower cost of living. Buenos Aires in Argentina is a reasonably cheap city that is hard to distinguish from western european cities or the Ukraine/Slovenia are other cheaper countries - Do some research.
4. If you're going to invest in the stock market wait until 2012 as its much too volatile now and invest in companies that you know will always sell/make products because human beings need them and look at the dividend yield (the share of the profits vs your money invested) that the company provides you. As long as its higher than 5% your doing better than inflation. You can do this through shares ISA or in your pension through your income drawdown account. Corporate Bonds in larger companies may also have higher returns now - you'll need to buy a corporate bond fund to participate either through an ISA or your pension account.
5. Put your savings in another country on fixed deposits. If you have family abroad, say India, you can open a bank account there using their help. Rates in India are 9-12% per year on fixed deposits. Of course, you do run currency exchange rate risks but right now the West is unlikely to grow as fast as emerging markets countries like India.
6. Annuities are at their lowest level for decades and basically you're just outsourcing your money to someone else to look after in exchange for peace of mind. But with all the scandals and Life company failures it seems their not as safe as people once through they were. If you have the time do some research with lots of annuity providers if you're going down this route. Sometimes other providers can offer you up to 40% more for your capital. Remember to always give them a full medical history. Anything wrong with you will only increase your annuity. In this morbid world their trying to estimate when you will die so give them every reason to think it will be sooner!
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