What a year it’s been. Certainly one to forget. We’ve had stockmarket turmoil around the world, the end of Woolworth’s, job losses, falling interest rates, falling annuity rates. Then we get freezing fog today to round it all off.

You’ve probably seen a drop in the value of your pension fund this year. You might have even delayed your retirement and put off buying that pension annuity. The value of your building society savings won’t be what they were.

Then we had the problems of the Northern Rock and the Bradford and Bingley. Who’d have thought it?

No, it’s not been the best of years. Hopefully, you’ve still got your health. That’s really what matters as we move towards 2009.

Putting it another way; are you planning to retire during 2009 and considering a pension annuity as a vehicle to provide your valuable retirement income? If the answer to this is ‘yes’, start looking at your options now and ask yourself some questions:

Do you want to spend your reduced pension fund on a pension annuity?

Might you be better off by not committing to an annuity just yet, perhaps by opting for an income drawdown plan instead?

If you are going to go for an annuity, are you sure you can find the best annuity rates for your circumstances?

Are you sure you know enough about what is available to you? Have you sought advice?

There are more questions, I am sure, but the main thing is that you give yourself time and get a specialist working alongside you. The right choice of retirement income could be worth a lot to you in your years in retirement.

It is now nearly ten years since newspapers first reported Equitable Life’s refusal to honour guaranteed annuity rates that had been sold to some of its 1.5m savers. In this period, this without-profits fund has cut bonuses and imposed exit penalties on leavers, while policyholder numbers have dropped to 500,000.

And, in 2008, the Government broke a series of promises regarding compensation payments. Chancellor Alistair Darling even told the House of Commons on October 8 that the  Government would report on Equitable Life ’shortly’.

By the time of the debate about the Queen’s Speech on December 3, even Gordon Brown seemed to be ashamed of the apparently endless delays over this matter. He promised to respond to the Parliamentary Ombudsman’s report before Christmas. Another deadline missed!

Sadly, about 30,000 Equitable Life policyholders have died since the House of Lords effectively closed this company down.

Surely, we should soon be hearing some good news about compensation for the surviving unfortunate annuity holders and their families.

Leading pension annuity providers are calling for a rethink of sweeping new EU solvency rules that could force them to hold billions of pounds of extra capital and make them cut annuity payouts to pensioners.

One annuity provider has calculated that under Solvency II, new European rules, due by 2012, (aiming to match the capital insurers hold much more closely to the financial risks they actually face), it would have to hold 20% more capital to back pension annuities. Potentially, this could equate to a 20% reduction in pension payouts for the owners of annuity contracts.

Companies that are writers of pension annuity contracts hold corporate bonds so that they can meet the pension payments promised. However, the recent financial turmoil has driven down the prices of many corporate bonds, highlighting the problems for annuity providers.

If we have extreme market movements, life assurers’ capital could fall very quickly to the level where regulators begin to intervene, for example by potentially preventing them from writing new business.

Some experts state that Solvency II needs to be rigorously reviewed. It needs to ensure that it not only provides an accurate picture of a company’s trading performance for analysts and the market at large, but that the guidelines are actually flexible enough to withstand changing stockmarket conditions, such as those we are witnessing.

Mark Wood, of Paternoster, which takes on the assets and liabilities of mature occupational pension schemes, has called for pension annuities to be excluded from the Solvency II framework. A ‘logical solution’, he stated.

Prudential, another leading annuity writer in the UK, is also known to be concerned about the direction of Solvency II.

For all matters of personal finance 2009 is not expected to be an easy year. It is very likely that when it comes to the subject of pensions and annuities that there will be cuts in contributions and scaled-back pension schemes.

2008 can be seen as the year that stockmarkets around the world hit the buffers, and 2009 is going to be the year when the real economy we live with day to day finally realises it has run off the cliff edge  and starts falling. 

The financial services, construction and retail sectors have all suffered sharp reversals recently, resulting in a contracting economy and job losses. We now have to go through the very slow process of de-leveraging, paying off debts and adjusting to the new reality. 

As to pension provision, expect to see declining pension contributions; employers announcing pension scheme restructuring to reduce costs; and more people delaying retirement or to retiring on a lower annuity income than they had been planning for.

Unfortunately, it is likely that pension annuity rates are going to keep heading down throughout 2009.

We might with any luck see some movement from the government regarding how pension benefits are paid out from age 75, i.e. a change in the requirement to buy a pension annuity by that age.

2009 could therefore be a very difficult year financially. However, people will still want to retire and on the best terms available to them, and there will still be some options in the market which will be worth taking up.