Unfortunately, pension annuity rates are still falling, and have now gone down by some 10% since last summer, largely in response to the falling Bank Base Rate. Anyone buying an annuity today will get much less than if they had purchased one last summer.
Rates paid on annuities, which are used to convert a hard earned pension fund into a retirement income, reached a six-year high during July of 2008, but they have since fallen back quite dramatically, with the major providers all cutting their annuity rates since the Bank of England announced it was to embark on quantitative easing (QE) earlier this month.
The Government’s QE programme is having quite an effect on a generation of retiring investors, consigning many to a far poorer time in retirement as annuity incomes tumble. The future for annuities is bleak, with annuity rates set to fall even further in the coming months. We could be looking back thinking how good today’s rates have been.
Looking at annuity quotes today, the best rate for a 65-year-old man with a £100,000 pension pot who was buying a level annuity without any spouse benefits, would now be 7.135% or £7,135, down from the £7,240 he could have got the day after QE was announced.
So, if you are nearing retirement, make sure you check out carefully the annuity quotes on offer to try and ensure you get the best annuity rates for your money. And, look into the other retirement options out there. It could be that one of them is better for you.
