Annuities Rate Trends

Annuities Rate Trends

Pensioners shopping for an annuity have been getting more for their money in the last 12 months. Unfortunately pension experts believe this is a temporary fillip on an otherwise downward spiral.

The problem is the triple whammy of an aging population, low interest rates, and falling bond yields.

This means that although annuity rates have rallied slightly in the last 12 months they are still considerably down on what they were a decade ago, and more importantly actuaries see little prospect of them ever returning to their previous highs.

Indeed allowing for the recent increase, the average annual annuity payout is half what is was 10 years ago.

A lump sum of £100,000 will buy a man of 65 an annual annuity of £4,800 at current prices.

The annual income for a woman of the same age, with a same sized pot would be even less, £4,350.

The implications of all this is that when you come to buy your annuity you, or your adviser, will have to put some effort into identifying the best deal.


Boosting annuity payout

It is possible to boost your annuity rate by possibly as much as 20%, according to the Pension Advisory Service, by shopping around. This is called the “open market option” in industry jargon.

Those of you in poor health may also find that opting for what is called an “impaired annuity” section will increase the annual sum you are offered in exchange for your pension pot.

It’s important to note that conditions such as type 2 diabetes, raised cholesmore generous annuity. So mention them on the forms and to your adviser.

If you want to get a specific idea of how big an annuity you could get with your pension fund, we can connect you to an IFA who specialises in annuities. They will give you a quick customised quote.

This is a free service and you’re under no obligation to proceed in any way. Click here.