Warning – Annuities At An All Time Low!

25th November 2011

Warning – annuities at all time low!

These are hard times for those about to retire. The pension pot that has been building up over the years will bring in a lower income than hoped and expected due to the falling gilt yields.

As expected, quantitative easing has decreased gilt yields and as a result annuity rates are low.  The only hope would be an increase in interest rates which would push up the value of gilts and increase annuity rates, but with the economy in such a precarious state that is looking unlikely for a while yet.

Currently, a £100,000 pension fund will buy a single life level annuity, which does not rise with inflation, of £5,932 per year income.  In July 2009 the same fund would have bought £7,855.

For retirees there is little room for manoeuvre. There have only been 2 occasions in the past 20 years (1994 and 2008) when it has paid to delay an annuity purchase in the hope of better rates.

This means that now, more than ever, shopping around for the best annuity rates is a must, although when doing so there are many things to be taken into consideration such as health and marital status.

Those with larger 6 figure sums could look at fixed term annuities then buy another when the rates are better.  Investment linked annuities are also an alternative but obviously cannot be guaranteed ether.

In these difficult times independent advice is more essential than ever.  There are options that can be considered such as those mentioned above and they will also be able to help with buying the most appropriate pension for you – remember that the most appropriate is more important than the cheapest.

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