A new survey has confirmed just how far Annuity rates have fallen over the past few months.
The latest figures from the MGM Advantage Annuity Index show that Annuity rates have fallen by 7% over the past three months.
Enhanced Annuity rates, which can provide a higher income for people who suffer from ill health or have certain lifestyle issues, such as smoking, fell by 5%.
However, the survey also found that an Enhanced Annuity gave on average 21.5% more income per year than a conventional Lifetime Annuity.
The reductions of 7% and 5% respectively were the largest quarterly falls since the MGM started the survey in 2009.
Using an online pension Annuity calculator can show exactly what Annuity rates you will qualify for.
20% drop in Annuity rates
The survey also found that Annuity rates had dropped by a massive 20% from August 2009 to September 2012.
Aston Goodey, Distribution & Marketing Director at MGM Advantage, said: “Annuity rates are in free fall, largely driven by record low gilt yields.”
“We expect further falls over the coming months unless we see a significant upward movement in gilt yields.”
Retirement experts have also warned that further falls in Annuity rates are to be expected over the next few months as the EU gender directive, equalising
Annuity rates between men and women, is implemented.
Solvency II, another piece of EU legislation, this time due to be introduced in 2013, will also put downward pressure on Annuity rates.
Shopping around to buy your Annuity
The survey also looked into the effect that shopping around has on Annuity rates.
All Personal Pensions offer an Open Market Option (OMO), which allows retirees to shop around for the best Annuity rate. Experts always recommend that would-be retirees shop around for the best Annuity rate and the MGM survey shows that by doing this income can be increased by nearly 50%.
For men the difference between the best Enhanced Annuity and the worst Lifetime Annuity was 44%, for women the figure was higher, at 48%.
Aston Goodey again:”Shopping around for the best annuity rate is critical to ensure you are not short changed.”
Our team of Independent Financial Advisers in Nottingham are experienced in developing retirement income strategies for clients the length and breadth of the UK. If you are approaching retirement and would like advice on your options call one of our IFAs today on 0115 933 8433, alternatively enquire online or email firstname.lastname@example.org