Retirement Money News

Annuity rates are at their lowest point in the product’s history, with income payable falling by over 10% since the beginning of the year, research from Moneyfacts.co.uk reveals.

Analysis of data on the average annual pension annuity income shows that while it has been declining throughout 2019 there has been a rapid fall since August 2019 on the back of a sharp fall in gilt yields. This latest drop in annuity rates means that average annual annuity pension income is now 1.2% lower than its previous all-time low back in September 2016 for a £10,000 purchase price.

Moneyfacts.co.uk has looked at the average annual income payable on a single life standard level without guarantee annuity for a 65-year old and found that the income has fallen by between 12.3% and 12.5% (depending on the purchased price) since the start of the year. For an equivalent enhanced annuity, the reduction is between 10.2% and 11.4%.

Falling average annual pension annuity income since the start of 2019

Figures show gross annual annuity income payable monthly in advance. Figures based on an annuitant age 65 buying a single life level without guarantee annuity. 

Falling average annual pension annuity income since the start of 2019

Figures show gross annual annuity income payable monthly in advance. Figures based on an annuitant aged 65 buying a single life level without guarantee annuity. 

People in the UK are feeling slightly more confident about their ability to retire comfortably than they did two years ago, research from Aegon reveals.

According to Aegon, just over half (52%) of people it surveyed now feel confident about their ability to retire comfortably, compared to just under a half (48%) in 2017. Saying this, one in 10 (10%) of those surveyed admitted that they don’t have any pension savings, while a quarter (25%) of those with pension savings said that they don’t know how much they hold in pensions.

In addition to this, 36% of those surveyed have never estimated their income needs for retirement, which while down from 43% in 2017, Aegon believes still needs to be reduced further to lower the number of people putting themselves at significant risk of being unable to maintain their existing lifestyle during retirement.

Steven Cameron, pensions director at Aegon, said: “It’s encouraging to see an indication of growing confidence over the last two years when it comes to being able to retire comfortably.

“Pensions have frequently hit the news headlines in the last few years. While at times this has been for less good reasons, there have been lots of positive stories such as the success of automatic enrolment and the new retirement flexibilities under pension freedoms, which have been built on by initiatives such as the Pensions Awareness campaign from Pension Geeks. All of this has contributed to raising the profile of retirement planning, leading to people taking more interest and action, improving the confidence people have when it comes to being able to retire comfortably.

“But we must remain realistic. Overconfidence carries risks and people mustn’t be lulled into a false sense of security. While auto-enrolment means millions of employees are saving more for retirement, that doesn’t mean they’re on target for the retirement they aspire to or to maintain their pre-retirement standard of living. Furthermore, the growing population of self-employed are excluded from auto-enrolment and can’t rely on an employer to support their retirement funding. Realistically, there’s a lot more required to make sure you’ve saved enough for the retirement you would like.

“It’s also worrying that a significant minority of people don’t know how much they have in their pension. Those in the 30 to 54 age band are in the best position to take action now to make a big difference to their retirement income. Whatever your age or circumstances, finding out more about your pension funds and prospects can only be a good thing.”

Over half (53.9%) of baby boomers said that passing on their wealth to their children is important to them while one in five (19.1%) would choose to spend any extra money on a financial gift to their children, research from Aegon found.

According to the research, a desire to pass on wealth to their children may impact their ability to enjoy retirement, with a fifth of baby boomers (those born between 1946 and 1964) saying it might hold them back from spending more during their retirement.

Steven Cameron, pensions director at Aegon, said: “As the youngest of the baby boomers reach the age they can access their pension, many will begin to think about inheritance planning and the desire to pass on wealth to loved ones. Transferring wealth is an ambition for many individuals and the introduction of the pension freedoms in 2015 has increased the options for doing so with over-55s now being able to access their defined contribution pension pot flexibly, taking out as much or as little as they like.

“For some retirees looking to pass on wealth, however, the desire to help family members may come at a cost if it means they hold back from spending in order to fulfil this expectation.

“It’s good that there are now more options for transferring wealth to the next generations. But whether it’s passing on remaining defined contribution pension funds on death or granting financial gifts earlier to help children on to the housing ladder, there are complex considerations including around tax.

“The options available and the tax implications will depend on your personal and financial circumstances, so it is best to seek financial advice to make sure you are taking the best course of action for you and your loved ones. While for some the advice will show a degree of caution is needed to ensure savings do not run out in retirement, for others it could highlight a level of underspending and encourage a less frugal approach.”

There has been a rise in retirees withdrawing cash from their pension pots and depositing the money into easy access account, new statistics show.

Data from HMRC shows that between April and June this year, £2.75 billion was withdrawn from pensions flexibly, with 760,000 payments made – a 21% increase on the same period the previous year when £2.27 billion was withdrawn. In addition to this, between April and June 2019, statistics from the Bank of England show £7.5 billion was deposited into accounts that are accessible without penalty, which includes easy access accounts. During this time, the money deposited into time restrictive accounts, including fixed rate bonds, was just £1.7 billion.