It’s a bit of an eye-opener this. Looking at the historical levels of pension annuity rates and what has happened to them. First, what exactly is an annuity? It is a pension income you get in return for selling your pension fund to an annuity provider (an insurance company). You might sell your fund of, say, £75,000, and get a guaranteed income till you die of 6%, which is £4,500 per annum.
Now the interesting bit, pension annuity rates have fallen from around 9% of your retirement fund per year down to just 6% in the past ten years. That’s a pretty bad combination with an average 10 years of no real capital gains in the stock market.
And there’s more. At the beginning of the 1990′s pension annuity rates were 15%. Anyone retiring now, counting on getting an annuity to pay their bills, etc., may be rather distressed by the deterioration they’ve seen in these annuity rates over the years.
It doesn’t look good, but you can only work with what you’ve got. You owe it to yourself to seek out some annuity quotes and find the best annuity rates available today for your circumstances, not forgetting the other pension options that exist. Alternatives such as income drawdown or phased drawdown might be a better retirement solution for you.
