Drawing Pension Benefits

Annuity rates are on the route to their lowest level in three years with average income arranged on a standard basis having fallen by 5.5% since the beginning of the year. This is based on an income for a 65 year old with a £10,000 pension pot. At the higher purchase price of £50,000, the average standard annuity income fell by 3.8%.

In addition, enhanced annuity income (for those with life affecting health conditions) fell by 4.5% during the second quarter of 2019 and has decreased between 4.9% and 6.1% (depending on the purchase price) since the beginning of the year. It now stands at £493.84 per annum for a £10,000 purchase price for a 65 year old. 

This is mainly due to the fall in Gilt (Government Bond) yields as annuity rates are linked to Gilts and therefore we are unlikely to see a rise in annuity rates until Gilt yields rise. Of course, we are all now living longer which means those annuities purchased will need to provide an income over a longer period than they did in previous years which also has a negative impact on annuity rates. 

This will not be good news for those looking to guarantee an income from their pension benefits this year, although with the pension reforms, there are of course other methods available for drawing pension benefits. Many have chosen to shun annuities altogether due to the inflexibility and loss of the capital value on purchase and have opted to flexibly access their pension benefits. However, lifetime annuities are still appropriate for some in view of the guaranteed income they provide.

If an individual has certain health conditions, they may be able to obtain a more competitive annuity rate by purchasing an enhanced annuity.

How Can We Help?

If you are nearing retirement and wish to know the most appropriate method for accessing your pension benefits to meet your individual needs, please contact the office and speak to one of our highly qualified Advisers who will be happy to assist you further.