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Pensioners facing less annuity cash as £17bn surplus hits gilt issues

The announcement of a £17bn surplus in the Budget has raised fears of a further fall in the value of annuities, plunging more pensioners into a funding crisis over retirement income.

Industry experts believe the surplus means that the Government will not need to make any further public borrowing, which will have a knock-on effect on the availability of gilts.

With fewer long-dated gilts available, the cost of annuities is likely to rise further as companies scramble to buy those that remain. This means that people will have to save even more to buy an annuity for their retirement.

Informed Choice managing director Nick Bamford says: &#34This is bad news for pensioners. We can do without further pressure on gilt yields. With increased life expectancy and lower gilt yields, it means that people will need to put even more money into their pension funds to compensate.&#34

Scottish Life head of communications Alasdair Buchanan says: &#34I predict that this will make it even more difficult for people to secure a competitive annuity rate, given the lack of long-dated gilts and the lack of need for Government borrowing.&#34

Scottish Equitable pensions development director Stewart Ritchie says: &#34The repayment of the Government debt implies that there will be fewer gilts in issue and this in turn suggests the price of those in issue will go up and, therefore, annuities will become even more expensive.&#34


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