Annuities: Summer misery for Annuity rates


Dark, Ominous Clouds Promise Rain and poor Weather.New research has shown that Annuity rates have suffered their biggest fall for three years in a summer of misery for pensioners.

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The research from Moneyfacts shows that the typical Annuity rate fell by 2.6% in August.

Furthermore, since the start of 2014 rates have fallen by 3.2%.

Enhanced Annuity rates

The data also shows that Enhanced Annuity rates have fallen sharply in 2014 and were down by a further 1.3% in August.

Experts believe there are a number of reasons behind the dramatic falls in Annuity rates:

  • Gilt yields dropped by around 10% in August
  • Demand for Annuities has fallen as a result of the Budget changes
  • Annuity providers want to maintain their profit margins, which are being squeezed following the Budget

Commenting on the figures Richard Eagling, Head of Pensions at Investment Life and Pensions Moneyfacts, said: “A fall in Annuity rates of the magnitude that we saw in August is unusual, but a significant reduction in gilt yields combined with falling demand has left annuity providers with little room for manoeuvre.”

Eagling continued: “These are testing times for the annuity market and we expect that pricing Annuities will remain challenging until the new pension freedoms are introduced next April.”

“Although many individuals approaching retirement will be looking to postpone their decision on how to take a retirement income until then, the significant fall in Annuity income that we saw last month will be felt by those who require a guaranteed, secure income now.”