You are here: Home - Retirement - Retiring now - News -

Coronavirus scuppers retirement plans as annuity rates fall to record lows

0
Written by:
29/04/2020
People approaching retirement are encountering “the toughest conditions of any generation” with annuity rates at record lows and pension funds plummeting in value, data shows.

Figures from Moneyfacts show the average annuity income fell by 6% in the first three months of 2020, its lowest level on record.

It means a £10,000 pension pot would now buy a 65-year-old an average annual income of £406.67 a year compared to £428.71 at the start of the year.

In addition, the impact of the coronavirus pandemic on global stock markets means the average pension fund value fell by 15.2% between January and March, its worst quarterly performance on record, surpassing the falls seen during the global financial crisis of 2008.

Only 11% of pension funds avoided losses during the first quarter of the year, according to Moneyfacts.

The combination of falling pension fund values and lower annuity rates has had a significant impact on the retirement incomes available to those saving into a personal pension and looking to annuitise.

For example, an individual who had saved £100 gross per month into a personal pension for 20 years would have built up a final pension fund of £41,388. Using this to take an income through an annuity at age 65 means they will now receive just £1,663 a year, down by 18.7% on the start of the year, and 14.4% lower than the previous all-time low in October 2016.

Richard Eagling, head of pensions at Moneyfacts, said: “Whether it is individuals saving into a pension scheme or currently in drawdown, or retirees looking for the security of an annuity, the coronavirus pandemic has had a devastating impact on potential retirement outcomes.

“The hope is that these will prove to be short-term shocks, but for those planning for retirement now and looking for a retirement income immediately, they present unenviable challenges.

“UK pension policy has increasingly moved towards placing more onus on individuals to take personal ownership of their retirement finances in recent years and take on the risks associated with this, but unfortunately recent events have shown how vulnerable they can be to major world events.”

There are 0 Comment(s)

If you wish to comment without signing in, click your cursor in the top box and tick the 'Sign in as a guest' box at the bottom.

Yorkshire BS launches 7% savings account – but there’s a catch

A regular cash savings account has been launched by Yorkshire Building Society paying 7% on a maximum of £500...
Yorkshire BS launches 7% savings account – but there’s a catch

Mortgage wars heat up as Santander, Virgin, NatWest and HSBC slash rates

The ongoing mortgage rate reductions are heading towards a third month, with existing customers and new buyers...
Mortgage wars heat up as Santander, Virgin, NatWest and HSBC slash rates

Homebuyers have 18 months left to avoid stamp duty hike

Future homeowners have 18 months to dodge a stamp duty hike which could cost buyers around £2,500, analysis ha...
Homebuyers have 18 months left to avoid stamp duty hike

Ryanair jetting towards US flights for £10

Ryanair is on course to achieve its long-held ambition of offering transatlantic flights to the US – and the...

Investing in car parks: a good vehicle for income seekers?

As the search for income continues, many investors are turning to alternatives, with car parks becoming increa...

A quick guide to guarantor loans – in association with Guarantor Loan Comparison

Considering a guarantor loan or becoming a guarantor yourself? Read our essential guide...

Results round-up: Companies to watch this week

Mulberry and more will face the music this week.

Product launches of the week

Select Property Group, Schroders, Leeds Building Society and more have exciting news this week.

Money Tips of the Week