Some money websites today are discussing the notion that there is a crisis for those seeking a pension annuity. Falling interest rates and quantitative easing have meant that rates have fallen over the past two years, with stock market turbulence causing pension pots to have not grown significantly or have stood still in many circumstances. Some experts have also cited the fact that middle-class savers could be the worse hit as more affluent areas tend to come off less favourably in terms of rates offered - as many insurers now use people’s postcodes to help determine life expectancy rates. This has been criticised in some quarters as being nothing more than a ‘postcode lottery’. However with the gap in life expectancy up to 13 years when comparing West London to West Glasgow, some argue this is a wholly legitimate tool for the insurance companies.
To illustrate the current woes of pension savers, experts estimate that the average couple of pensionable age are now £7,000 a year worse-off now compared to December 2008. Billy Burrows from Burrows & Cummins says that “‘...the world has changed for a large part of Middle Britain. The credit crunch has been a watershed for those people in “comfortable” positions – those who aren’t reliant on state benefit but not rolling in money either. These people have been hit with a pensions double-whammy: they’ve already lost money from their funds as stock markets have slumped, but now they’re reaching retirement age and are being hit with low annuity rates.”
With rates for annuities falling in the past 24 months, it has become more difficult for those approaching retirement without a final salary scheme to feel secure in their finances. Nowadays, it is absolutely essential that you shop around providers for the best deal.
To show just how far rates have fallen, those with a Joint Annuity fund of £100,000 in December 2008 could have enjoyed an income of £6,700 a year. An equivalent annuity now would be worth just £6,000. Much of this fall has been blamed on the Bank of England who have bought up gilts (government bonds) which has boosted their value but lessened the yield.
Related posts:
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- Falling pension annuity rates are hitting annuitants say MGM
- More IFA’s are probing annuitants over medical history
- Pension annuity rates fall to new low
