Annuity rates are “plummeting” in 2016, making it the worst year for pensions payouts. Data provider Moneyfacts reports that rates have fallen by 15% so far, and further drops could follow.
The Guardian writes –
“Annuities are an income for life, whereby those retiring can swap their pension savings accumulated while at work for an agreed fixed income, paid out every year until they die… Moneyfacts said that the average annuity income for a 65-year-old had fallen by 14.8% on a £10,000 purchase price and by 15% on a £50,000 purchase price so far in 2016. The figures are based on a pensioner buying a flat-rate annuity that does not increase… The falls in annuity rates easily surpass the previous largest annual annuity income drop of 11.5% recorded in 2012… Most financial advisers reckon that a safe level of draw-down from savings is around 4% a year. But this suggests that a pensioner needs to accumulate £250,000 in savings to be sure of an income of £10,000 a year.”