Annuities: Rates at their lowest ever level


Annuities: Rates at their lowest ever levelHot on the heels of Pensions Freedom, pensioners who still want to buy an Annuity have been dealt a blow, as new research has revealed Annuity rates have fallen to their lowest ever level.

The research from Moneyfact has found that standard Annuity rates have fallen by 5.9% for a 65 year old with a £10,000 pension pot and by 6.4% for someone with a larger £50,000 fund.

A 65 year old with a £50,000 pension pot, will now be able to secure an income around £180 lower than he or should could have done just four months ago.

According to Moneyfacts standard Annuity rates, which don’t take into account your health, are now at their lowest level for 30 years.

Following a fall in gilt yields, the drop in standard Annuity rates shouldn’t come as a surprise to pension savers. Although, it will certainly disappoint those people who have put off decisions until after the start of Pensions Freedom in April.

Enhanced Annuity rates

For people who have suffered from ill-health or are exposed to certain lifestyle factors, such as smoking, an Enhanced Annuity may increase the level of income available.

According to Moneyfacts Enhanced Annuity rates have been “slightly more resilient” so far this year.

Why buy an Annuity?

Although many people will undoubtedly be tempted by the flexibility offered by Pensions Freedom, there are still many reasons why an Annuity could be the right option for some, or all, of your pension pot.

The main reason for buying an Annuity is that is effectively a long-term insurance policy, guaranteeing the income for the rest of your life, and that of your partner or spouse, should you choose to include this option.

There are of course other reasons to buy an Annuity:

  • An Annuity provides a guaranteed income, which can never be changed
  • 100% of the Annuity income will soon be protected if the insurance company you bought it from goes bust
  • It is a relatively simple solution, which requires no on-going maintenance or reviews

There are of course downsides to an Annuity, especially if you select a level income and inflation erodes its true value, or if you die sooner than expected which may mean you get less back than the original purchase price.

We’re here to help

If you are close to retirement, or want to take advantage of the new Pension Freedoms, we’re here to help.

Our advisers are highly experienced in recommending the right solution for you when you retire.

Initial discussions are without cost or obligation, so call us today on 0115 933 8433 or email