Annuity Rates Have Fallen By Over £1,000 | moneyfacts.co.uk

Derin Clark

Derin Clark

Online Reporter
Published: 15/09/2020

Workers nearing retirement and looking for the income security provided by an annuity will be disappointed by our research which found that average annual annuity income has fallen by over £1,000 over the last decade.

“Those looking for a guaranteed income during their retirement may be considering an annuity, but over the years this market has contracted significantly and there are only a few providers left in the open market annuity area,” explains Rachel Springall, finance expert at Moneyfacts.co.uk. “As it stands, an annuity for a single life male aged 65 who has a £50,000 lump sum and takes out a level without guarantee annuity (standard or enhanced included) will receive an annual annuity income of £2,295 on average paid monthly in advance, but this is £1,080 less than the same time ten years ago.

Pension shortfall

Those nearing retirement will have likely seen their pension savings take a hit during 2020, as the Coronavirus pandemic negatively impacted global stock markets. Saying this, last month we reported that pensions funds were starting to see signs of recovery, but as the long term impact of the pandemic on the economy is not yet clear it could still mean pension savers will retire with less than they had initially thought.

As well as this, women nearing retirement could find themselves with a larger pension shortfall to plug, as Springall explains: “There may well be a pension shortfall to plug and according to recent research from more2life, there continues to be a gender pensions gap, men expect to receive £3,750 more a year more than single women over the age of 55 and half of men surveyed have an independent pension wealth compared to just 39% of women. Clearly it is imperative that appropriate planning should be put in place to ensure someone can afford a comfortable retirement, but it is understandable to see why pension contributions may be overlooked”

How to boost your pension

One option for those nearing retirement is to work longer, which would enable them to put more money into their pension pot and delay taking the state pension. Although it should be kept in mind that already the pension access age will rise to 57 by 2028, up from its current age of 55 which was introduced in 2014. In addition to this, at the same time the state pension age will rise to 67. This means that those looking to delay their retirement could find themselves working into their late 60s or early 70s.

Another option is to consider equity release. The equity release market is currently thriving as research carried out by Key Partnership found that during 2020 a new equity release product was launched every 28 hours. According to Key Partnership this increase in competition has resulted in a focus on innovation, better rates and improved product features. Despite improvements to equity release products, those considering equity release should be aware that it can have long-term financial and inheritance implications and, as such, it is important to speak to an independent financial adviser first. As well as this, with so many different equity release products on the market, speaking to an equity release advisor might be beneficial to help choose the right one for individual circumstances.

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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