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2016 set to be worst year ever for annuity rates

Joanna Faith
Written By:
Joanna Faith
Posted:
Updated:
21/09/2016

Annuity rates are on track for their worst year ever, according to analysis by Moneyfacts.co.uk.

It found the average annuity income for a 65-year-old man with a £50,000 pension had fallen by 15% so far during 2016 and by 14.8% on a £100,000 pot.

These figures easily surpass the previous biggest annual annuity income fall of 11.5% recorded in 2012, Moneyfacts said.

Insurers price annuity rates in relation to yields on gilts and corporate bonds. UK gilt yields have fallen to their lowest ever level of around 1% since the Brexit vote and and even dipped into negative territory in late June.

Richard Eagling, head of pensions at Moneyfacts, said: “2016 has been a truly awful year for annuity rates, with rates falling to all-time lows. This is particularly disappointing as the stock market volatility that we are experiencing has re-emphasised the importance of a secure lifetime income for many retirees.

“Unfortunately, record low gilt yields following the EU referendum result and a significant weakening of competition in the annuity market have all exerted considerable downward pressure on annuity rates during 2016.”

How to improve your annuity rate

These figures will come as a blow to people approaching retirement and considering their income options.

However, there are things you can do to get the best rate possible including: shopping around for quotes and not necessarily sticking with your pension provider, disclosing as many personal and health details as possible and seeking professional advice from a financial adviser.

For more, read our guide to getting a better annuity rate