Gap between best and worst annuities widens - Annuities - News - Moneyfacts

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Gap between best and worst annuities widens

Gap between best and worst annuities widens

Category: Annuities

Updated: 27/10/2011
First Published: 28/06/2010

MONEYFACTS ARCHIVE
This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.
Retirees could be missing out on thousands of pounds as a result of poorly performing enhanced annuities.

The latest MGM Advantage Annuity Index, which is based on data from Moneyfacts.co.uk, has revealed that the difference between the income paid on the top and bottom quartile of enhanced annuities is continuing to grow.

Over an average retirement, men could now be £10,129 worse off, while women face being up to £11,351 out of pocket, if they choose an annuity that is judged to be in the bottom quartile with their £50,000 pension pot.

Figures also showed that annuity rates have fallen by almost 3% over the last 12 months.

Rates have actually fallen in each of the last four quarters, highlighting the importance of shopping around for the best option in which to invest your pension pot.

To illustrate, between April and June this year, the difference between the top and bottom rates paid by enhanced annuities for men was 16.78%, a significant increase from the 12.5% gap reported between January and March 2010.

Over the same period, the margin increased by almost 4% to 17.01% from 13.06% for women.

For the first five years of retirement, men buying a bottom quartile enhanced annuity could be £2,152 worse off and women £2,837.

Worryingly, both men and women would now receive over £600 less in the first five years of retirement than they would have done just three months ago.

"There are significant differences between the best and worst annuity rates for conventional and enhanced annuities, making it more crucial than ever to shop around for the best deals," commented Craig Fazzini-Jones, director at MGM Advantage.

"And, with annuity rates falling and likely to continue falling, it's a good time to consider alternative retirement income solutions that can offer more flexibility than a fixed level annuity to maximise retirement income over the longer term."

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Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.

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