Average rates of standard annuities have fallen to a record low just 3 weeks after the government’s pension reforms were introduced, research by Investment Life & Pensions Moneyfacts has found.
Annuity rates have experienced a marked decline since the reforms were announced during Budget 2014, with the average annual income from standard annuities falling 5.7% in 2014.
The research by Moneyfacts suggests that downward trend has become more pronounced in the first 4 months of 2015:
- the average single life annuity for a 65 year-old with a £10,000 pot has fallen 5.9%
- this would provide an annual income of £476, down from £506 in January 2015
- the average for a 65 year-old with a £50,000 pot has fallen 6.4%
- this would provide an annual income of £2,550, down from £2,727 in January.
These are lowest standard annuity rates on record, surpassing the previous all-time lows in November 2012.
Enhanced annuity rates have also been hit by the pension changes:
- for those with a £10,000 pot, rates have fallen 5.3%
- this would provide annual income of £579
- for those with a £50,000 pot, rates have fallen 6%
- this would provide annual income of £3,055.
Richard Eagling, head of pensions at Moneyfacts, said:
“The prospect of securing a comfortable retirement has taken a further blow with news that standard pension annuity rates have hit an all-time low. In many cases, retirees looking for a secure income now face the unenviable position of annuitising at the lowest point in the product’s history.
“This is particularly unfortunate for those individuals who may have deferred making a choice until the introduction of the pension freedoms but have since decided that an annuity is still the most suitable product for them.”