On the go: Fears of a no-deal Brexit and a slowdown in the global economy have pushed annuity rates to near record lows, according to Hargreaves Lansdown.
A £100,000 pension now buys a 65-year-old £4,654, £759 less than at the start of the year. The forecast is for a single-life, non-increasing annuity, guaranteed for five years and paid monthly.
The yield has fallen for all ages, especially for younger retirees, with annuity rates having only ever spent nine weeks at a lower level. Volatility has also been high, with rates having changed 46 times in 2019, mostly downwards.
The low yield will inevitably encourage retirees to take more risk with their pension pot. According to Refinitiv Lipper, there are currently 116 funds available that pay an income greater than a 65-year-old can obtain from an annuity, with 32 of these paying a monthly income, 48 quarterly, and the remainder paying only once or twice per year.
Commenting, Hargreaves Lansdown senior analyst Nathan Long said: “Anyone coming up to retirement needs to choose their options carefully. It’s unlikely to be best to buy an annuity when you’re still working, but when you finally retire permanently a combination of secure income to cover the essentials and drawdown for the nice-to-haves is a solid approach.”
Age | 60 | 65 | 70 | 75 |
Income at the start of the year | £4,776 | £5,413 | £6,099 | £7,055 |
Income now | £4,051 | £4,654 | £5,443 | £6,419 |
Change | -£725 | -£759 | -£656 | -£636 |
-15% | -14% | -11% | -9% |
