Annuity rates at record low

"Since the purchase of an annuity is a one-off transaction, it is vital that consumers shop around for the best deal for their money”

annuity rates at record low

Annuity rates at record low

Research from Investment Life & Pensions Moneyfacts has revealed that, after holding firm during the summer, annuity rates have fallen steadily over the last two months.

The average rate for a male aged 65 purchasing a level without guarantee annuity (based on a £10,000 purchase price) has decreased by 3.3 per cent since September, whilst the equivalent female annuity has seen a 3.6 per cent reduction.

The latest reductions mean that the average male annuity rate is down by 10.8 per cent compared with a year ago, whilst female rates haven fallen by 11 per cent. Over the last 15 years the drop is even more remarkable, with male annuity rates now 45 per cent lower and female rates 42 per cent lower.

Given that the stock market recovery has recently boosted the size of many pension pots, many potential retirees are deeply concerned that falling annuity rates have had an adverse impact on the retirement income that can be achieved. Exacerbating the problem is the low level of gilt yields, which are still well below last year’s levels.

“Since the purchase of an annuity is a one-off transaction, it is vital that consumers shop around for the best deal for their money,” says Moneyfacts Richard Eagling.

“Although under the open market option, an individual is not required to purchase an annuity from the provider with whom they made their pension savings, in reality, relatively few take advantage of the opportunity to switch.

“With few signs that the recent spate of annuity price reductions is at an end, the priority must be to maximise the amount of retirement income received.

“For most consumers, this will only be achieved by shopping around to obtain the best price for their annuity and exploring the open market option. The difference between the highest and lowest standard annuity rates can be as much as 13 percent. The potential uplift for those in ill health who could qualify for an enhanced annuity is even higher.”

Annuity Rates
Annuity rates vary on a daily basis and, unlike many other financial service products, no one provider dominates the best buy tables.

Annuity Rates & Equity Release

What Is Equity Release?

Equity release is the use of financial arrangements that provide the owner of a house, or other property, with funds derived from the value of the property while enabling them to continue using it.

How Does Equity Release Work?

Equity release is aimed at homeowners aged 55 and over. It allows you to take some of the value of your home as cash.

Benefits of Annuity and Equity Release

The main benefit of using annuities is that they can provide regular payments and provide that much needed support if someone feels they have not necessarily saved enough. For older clients, they also offer a death benefit in which a considerable pay-out will likely be made by the insurance company regardless of the annuity’s investments perform. Equity release products, meanwhile, play a slightly different role. They then enable people (usually retirees) to access equity/capital that is locked up in their properties. 

Editorial Note: This content has been independently collected by the EveryInvestor advisor team and is offered on a non-advised basis. EveryInvestor may earn a commission on sales made from partner links on this page, but that doesn’t affect our editors’ opinions or evaluations. Learn more about our editorial guidelines.
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