View more on these topics

Annuity income falls 75% over 15 years

Clock money 620 x 430

Annual retirement income from annuities has dropped by three-quarters since 2000, according to Moneyfacts.

Based on a saver contributing £100 per month into an average personal pension fund over a 20-year period, the website found that annuitants are markedly worse off.

Moneyfacts says a saver retiring in 2000 would have accrued a pension fund of £89,366, with more favourable annuity rates equating to an annual retirement income of £7,748 per year.

Based on the same contributions, a saver retiring this year would have a fund of just £42,440 because of poor investment returns, while worsening annuity rates mean their savings would buy a likely annuity income of just £2,109.

The figures even show the situation worsening in the near term, with retirement income down 8% on figures for 2014, when a retiree could expect £2,292.

The site warns the scale of depreciation in annuity rates means even contributions of £300 a month may not be enough to build up the kind of income witnessed by savers at the turn of the century.

Whilst such saving would generate a post of £127,322 over 20 years, it would still only equate to an annuity of £6,327.

Moneyfacts Investment Life & Pensions editor Richard Eagling says: “There’s a real danger that tomorrow’s pensioners will end up in poverty.

“Private pension provision is still being neglected, and dreams of a comfortable retirement could easily be shattered unless individuals can either make up the pension shortfall through greater contributions, or accept that they may have to delay their retirement.”

Recommended

Grace-Adrian-aegon-2011-700x450.jpg

Aegon eyes UK annuity portfolio sale

Aegon is considering selling its UK annuity book as part of a business review. Earlier today Sky News reported the insurer is planning to sell some of its UK assets and has appointed investment bankers Citi to oversee the sale. Sources said the disposal could raise substantial proceeds for its Dutch parent company. An internal […]

Deadline-Clock-Alarm-700.jpg
3

ScotWids introduces guaranteed annuities grace period

Scottish Widows has introduced a three-month grace period for customers with valuable guaranteed annuity rates. When the pension freedoms came into effect in April, the firm changed its policy so people with GARs embedded in their policies would not lose them for three months after their nominated retirement date. Previously, the provider would honour the […]

Zurich-Building-700x450.jpg

Zurich to launch drawdown with deferred annuity

Zurich is to launch a blended product that puts customers into drawdown as well as a deferred guaranteed income. The advised-only product is due to launch in 2016. Customers will place the majority of assets into drawdown for the early part of their retirement, while some funds will be set aside to purchase a deferred […]

3

Sesame to pay widow £21,000 over missold annuity

Sesame has been ordered to pay a widow almost £21,000 after admitting it provided unsuitable advice to a client prior to a major operation. The firm reached the deal after the death of its client, when his widow referred the case to the Financial Ombudsman Service. Sesame advised its client, Mr K, to buy a lifetime […]

Newsletter

News and expert analysis straight to your inbox

Sign up

Comments

    Leave a comment