The impact of the financial crises and the global economic recession has hit home for pensioners. Data revealing the grim news that annuity rates have fallen 11% in 12 months was revealed this week. An annuity is a popular form of retirement income used by those who have defined contribution pensions or personal pensions. Here are an example to illustrate the falls, a 65 year old male will now only earn £625 per year per £10,000 saved, down from £1,145 back in 1994.
The paradox here is that pension pots themselves have grown in very recent times, as there has been a recovery on the stock market, partly fueled by a commercial property boom. Low capital values have generated interest from investors and fund managers who are eying up properties at rock bottom prices. However, equities and the gilt markets have not been as buoyant, meaning that rates for annuities have been falling sharply.
Martyn Saville from Which? commented that the continuing fall in annuity rates makes it more important than ever to shop around when buying an annuity. He underlined the importance of annuitants shopping around to get the best deal.
