‘Shop around’ warning as annuity rates slide again - Annuities - News - Moneyfacts


‘Shop around’ warning as annuity rates slide again

‘Shop around’ warning as annuity rates slide again

Category: Annuities

Updated: 20/01/2012
First Published: 24/10/2011

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 It is now over 6 months old so the content may be out of date.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 have been urged to shop around for the very best annuity deals after it was revealed the income delivered by conventional annuities has dropped by more than 4% over the past three months.

The latest MGM Advantage Annuity Index, which is based on the analysis of Investment Life and Pensions Moneyfacts data, showed conventional annuity rates had dropped by 4.15% since June.

The rates paid on enhanced annuities, which pay out more than their conventional counterparts to people with certain illnesses or who smoke, slipped 2.33% lower.

The resultant 3% drop in overall average annuity rates is the largest decrease seen since September 2010, while it also means rates have fallen by 5.79% since June 2009.

Elsewhere amongst the data, the importance of getting the very best annuity was revealed.

According to the calculations, a male with a £50K pension pot could expect to receive an average yearly income of £3,239 if he opted for one of the best standard annuities.

However, if the same man settled for one of the worst annuities currently on offer, his annual income would be just £2,831.

Over the course of an average retirement, the annual difference of £408 adds up to a grand total of £6,938 in lost income.

"These findings will put even more pressure on those people in or approaching retirement as they are faced with the reality of living longer, rising inflation and falling annuity rates," said Aston Goodey, sales and marketing director at MGM Advantage.

"And, the market volatility of recent months and weeks means the size of consumer pension pots have also fallen - giving this group of customers even less money with which to buy an annuity in order to generate an income for the rest of their life.

"Consumers really need to do their homework at this crucial stage of their life and that's why simply drifting into an annuity with their existing pension company can be so financially damaging."

Our new Retirement Planning service is the ideal starting point for anyone thinking about their life after work.

Find the best annuity for you - Compare annuities

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.

Related Articles

Secondary annuity market scrapped

The Government is cancelling plans for a secondary annuity market, citing concerns about consumer protection. Given there were fears that many could be ripped off – and that it wouldn’t be right for most – the decision has been largely welcomed.

2016 ILP Moneyfacts award winners announced

The winners of the 2016 Investment Life & Pensions Moneyfacts Awards were announced last night at a glittering ceremony held at the Lancaster London Hotel, amid much expectation and excitement.

2016: the worst ever year for annuity income

Tomorrow marks Pensions Awareness Day (PAD), yet our latest research doesn’t bode well for the sector – at least not for those seeking an annuity, with the data showing that annuity rates are on track for their biggest ever annual fall.