If you are a soon-to-be pensioner then you’re probably all too aware of the unfortunate annuities rates of recent years.
If you have annuities and retired a few years ago you would be seeing a return 21.6 percent higher than those who are thinking of retiring this year. The issue is falling annuities rates that have of course affected the amount to be paid to investors of these plans.
Annuity rates have dropped although standard rates stay fairly similar. So if you have a standard rate annuity you shouldn’t worry too much about these falling rates, but if you’re on an enhanced annuity rate it is more important than ever to shop around and get as much advice as you can, so you can make the most you can of your pension.
In years gone by, gender would play a part in how much your annual income was from your annuity as women had a longer life expectancy than men.
As of December last year, gender is no longer a factor in how much you can be paid – the amount is calculated regardless of sex. Although this seems like a good policy, it has affected the rates as “gender neutral pricing” has been applied to the calculations.
There are still ways to take advantage of annuity schemes. Many people don’t realise that they could bump up the amount paid out by 30% through an enhanced annuity. Through disclosing your medical history, any health issues and lifestyle choices they could be paid out a higher lump sum – such as declaring that you’re a regular smoker.
The facts are that schemes such as these are paying out less and less than the investors originally thought, so more and more people are choosing to work later into their lives to keep the lifestyle they desire.
My Pension Expert’s Scott Mullen said: “Annuities rates have fallen in the UK and the US in recent years due to the current economic climate. The banking crisis has led to record low interest rate on both sides of the Atlantic which is having a knock on effect on current annuity rates. This is because annuity providers use secure types of financial products such as corporate bonds and government bonds to provide the income for their annuity book as these types of investment are usually safe and low risk.