Retirees looking for a secure retirement income will be pleased to see that the average annuity income has increased year-on-year, but with average incomes still lower than they were in 2019, those entering retirement may want to consider alternative retirement income options.
Research carried out by Moneyfacts.co.uk found that the average annual annuity income in May 2021 was £2,357, this is an increase from the previous year when, in May 2020, the average income was £2,271. Two years ago, however, the average annuity income was £2,516, meaning that those retiring this year and who take out an annuity, will be £159 worse off each year than those retiring in May 2019.
This, combined with low saving rates, means that many workers nearing retirement are financially facing a challenging retirement, as Rachel Springall, finance expert at Moneyfacts.co.uk, explained: “Building a comfortable retirement pot may feel out of reach for some, particularly when interest rates sit at record lows and inflation is predicted to rise, leading to an erosion of the true spending power of retirees’ savings pots that supplement their pension provisions. Annuity income has failed to return to levels seen before the pandemic, which means consumers considering this option will be getting less yearly income than they may have expected. Retirees may well be facing a pensions shortfall and their savings are not working as hard as they could.”