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Annuity rates plummet to lowest level since 2012

Standard annuity rates have fallen to their lowest levels since November 2012, with the pace of decline increasing since the turn of the year, according to data published by Moneyfacts.

The rate payable for an average single-life standard annuity for a 65 year old with a £10,000 pot has fallen by 5.9 per cent in 2015.

The speed of decline in rates is more than double the shrinkage noted between Q3 and Q4, where rates fell by 2.8 per cent.

Similarly, if the same saver had a pot of £50,000, the rates they could have received have fallen by 6.4 per cent since the start of 2015, having previously dropped 2.5 per cent between Q3 and Q4 2014.

Average payouts for those with a £50,000 pot have now fallen from £2,727 to £2,550 since the start of the year.

Moneyfacts head of pensions Richard Eagling says: “The prospects of securing a comfortable retirement have taken a further blow with news that standard pension annuity rates have hit an all-time low. In many cases, retirees looking for a secure income now face the unenviable position of annuitising at the lowest point in the product’s history.

“This is particularly unfortunate for those individuals who may have deferred making a choice until the introduction of the pension freedoms but have since decided that an annuity is still the most suitable product for them.

“Could we be about to see a wave of new annuity business hitting the market at a time of record low rates in the same way that many individuals rushed to annuities before the introduction of gender neutral pricing, only to unwittingly fix their incomes in at the previous all-time lows?”

Enhanced annuities show a similar trend, with average single-life rates for a 65 year old with a £10k pot falling 5.3 per cent this year, while a £50k pot has seen average rates fall 6 per cent.

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Comments

There are 5 comments at the moment, we would love to hear your opinion too.

  1. Thank you George.

    Not content with trashing serious pension saving you have now buggered up the annuity market with your daft plans.

  2. What’s the surprise about this?

    anybody who has been following the 15 year bond yield will know that it fell to 1.78% in February ad is now barely above 2%

    If you want to follow the trend for annuities just look to the bond markets

  3. In what market are you getting >£3000 PER MONTH for a £50k pot!!!? It wouldn’t even be close to being that on an annualised basis even on a non-guaranteed basis with no frills etc.

    Either the person that wrote this is HUGLEY ill-informed or they’re being deliberately misleading.

  4. I may be missing something, but I think that when you state “average MONTHLY payouts”, you do in fact mean “average ANNUAL payouts”.

  5. @Billy

    Quite. Why an actuary would feel that any budgetary announcements would have the slightest bearing on their view or mortality, morbidity and discount rates is beyond me.

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