“Annuity rates have slumped alarmingly since the financial crisis and they just keep falling,” says Paul Farrow in The Sunday Telegraph. At the end of March £100,000 invested in a joint life annuity for a man aged 65 and a woman aged 60 with two-thirds spouse pension and level payments would get you £6,080. Today, it would pay £5,749. And if EU rules forcing providers to value annuities using gilt yields come into force, that amount could drop further still. So what can you do?
One in five of us is delaying taking an annuity, according to Schroders (the current rules allow you to delay converting a pension lump sum until the age of 75). But that’s not an option for anyone who needs a retirement income immediately.
But they should at least track down the best rate. Financial Services Authority rules force providers to tell you about the “open market option” – you don’t have to buy an annuity from the firm that has been managing your fund. But many people who have spent years grafting and saving “just take the first annuity that comes along”. This is madness – shop around.