This question is something that potential annuitants will be asking themselves up and down the country. The best way to try and answer it is to first get the best annuity quote you can (by shopping around providers) and then work out how much you will think you will need in retirement. For the majority of us that means having less spending power than when we are working, but hopefully some major outgoings (such as a mortgage) should be paid off by then.
With rates for annuities being so poor (28% fall in the last 10 years), despite a recent boost at the start of 2010, it seems many people who are about to retire will be in forced into lower living standards than they are accustomed to. According to the website rightannuity.co.uk “…A personal pension in which £100 was invested monthly for 20 years would have matured ten years ago with a pay-out of around £104,000. But today the same policy would produce a mere £40,800, according to analysis published by Investment Life & Pensions Moneyfacts.”
And if you think that was bad enough, annuity rates in the future could be even worse, given that new EU rules mean that insurance companies will soon be having to hoard more capital to keep their balance sheets in check. This is bad news all round for annuitants as many will find that they have not saved nearly enough for retirement. Some may be forced to work full time for longer (delaying retirement), work part-time during retirement or considering taking out equity release to free up some of the capital tied up in their home. For most people, none of these options will sound like an appealing retirement choice!
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