2019 was a good year for the drawdown market, while those looking for an annuity saw the heaviest fall in annuity rates since 2012.
Data from the latest Moneyfacts UK Personal Pension Trends Treasury Report (which is being published later this week) found that during 2019, retirees in drawdown benefited from one of the strongest pension fund performance since 2016. In fact, the data shows that the average pension fund returned 14.4% during the year and that investors have now enjoyed positive fund growth in four out of the five calendar years since the introduction of pension freedoms in 2015.
By contrast, the average annual standard annuity income fell by between 8.5% and 9% last year (depending on the purchase price). This is the second-heaviest annual fall recorded by Moneyfacts, which is surpassed only by the falls of between 9.4% and 11.5% during 2012. Saying this, there was some optimism in the annuities market at the end of the year, as during the last three months of 2019 rising gilt yields enabled annuity providers to boost the average annuity income by between 4% and 4.6%.
Average annual pension fund returns and average annual annuity income change since the introduction of pension freedoms
| Calendar year |
% pension fund growth |
% annual annuity income change |
| 2019 |
14.4% |
-8.5% |
| 2018 |
-6.2% |
-0.2% |
| 2017 |
10.5% |
1.0% |
| 2016 |
15.7% |
-5.3% |
| 2015 |
2.6% |
-3.1% |
Annuity figures based on an annuitant aged 65 buying a single life level without guarantee annuity for a £10,000 purchase price. Source: Moneyfacts UK Personal Pension Trends Treasury Report/Lipper
Commenting on the data, Richard Eagling, head of pensions at Moneyfacts, said: “Another year of falling annuity rates makes it even more imperative that those seeking an annuity maximise the payments on offer. They need to pay attention to the annuity information prompts that providers must supply to consumers about how much they could gain from shopping around and switching provider before they buy an annuity.
“For drawdown investors, the performance of pension funds in 2019 may have boosted their drawdown pots but they still need to regularly review any income that they are taking to ensure it is sustainable. Now is not the time for complacency for any retirees.”
