Annuity rates fall 2.6% in August
Annuity rates saw their biggest monthly falls in 3 years in August 2014, according to figures published by Investment Life and Pensions Moneyfacts.
The figures reveal:
- annual income from a standard annuity fell 2.6% during August 2014
- monthly income fell from £2,874 to £2797 – a difference of £77
- the fall in monthly income equates to £1,540 less income over a 20 year retirement
- standard annuity income is down by 3.2% during 2014
- this is the biggest monthly fall since August 2011
- average income from enhanced annuities also fell from £3,390 to £3,344 in August – a 1.3% drop.
The figures are based on a £50,000 pot for a 65-year-old.
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.
“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.”
Recent research by Fidelity Worldwide Investment revealed that more than half of people retiring in 2015 will take at least a portion of their income as a lump sum.
The survey of 500 people found that just 16% will definitely buy an annuity, while 18% will combine an annuity with a drawdown pension.
