Pensions - Articles - Annuity rates increase but growth unlikely to be sustained


- Average annuity rates increased by 2.4% in the second quarter of 20131
- Rates are up by 5.6% since December 2012
- In 3 years, rates have still fallen by 15%, meaning someone would need a pension pot worth 24% more today to generate the same annuity income as someone who retired three years ago2

 The latest MGM Advantage Annuity Index reveals average annuity rates increased by 2.4% in the first quarter of the year, and overall up by 5.6% since December 2012. However, the retirement income specialist is warning that this good news is unlikely to be sustained due to the long-term pressures being felt by the annuity market.

 Aston Goodey at MGM Advantage comments: "Although this is good news, annuity rates have only recovered the ground lost in the second half of 2012. We are also not even close to the rates seen even just three years ago, meaning people approaching retirement will face some difficult decisions."

 MGM Advantage has calculated that someone retiring today will need a pension pot worth 24% more than someone who retired three years ago to generate the same income from an annuity.

 Aston continued: "There is a sting in the tail for people looking to generate an income in retirement from an annuity. You will need to have a pension pot worth 24% more than someone who retired three years ago to generate the same income."

 Commenting on annuity rate trends, Goodey said: "Although annuity rates are on the way up, all of the signs indicate that rates will continue to remain low for some time to come. The continuing pressures of Solvency2, improving longevity and low returns on gilts and bonds will continue to hamper any sustained recovery in rates. The market has found its feet following the introduction of gender neutral pricing, with providers more comfortable with the mix of business they can take on. With new players also coming into the enhanced market, we may see rates pushed up in the short term. But looking ahead to the longer term we are unlikely to reach the level of rates seen five years ago."

Back to Index


Similar News to this Story

4 ways completing a tax return can help boost your pension
Missing the Self-Assessment deadline not only risks a penalty for late filing but could cost individuals hundreds, if not thousands of pounds in uncla
DWP holds AE thresholds with GBP90bn of pensions expected
The DWP has issued its review of the Automatic Enrolment Earnings Trigger and Qualifying Earnings Band for 2025/26, retaining all three thresholds at
Response to Triple Lock means testing comments
Aegon has called for ‘a future focused debate on a sustainable state pension’ following comments on the Triple Lock by Conservative leader Kemi Badeno

Site Search

Exact   Any  

Latest Actuarial Jobs

Actuarial Login

Email
Password
 Jobseeker    Client
Reminder Logon

APA Sponsors

Actuarial Jobs & News Feeds

Jobs RSS News RSS

WikiActuary

Be the first to contribute to our definitive actuarial reference forum. Built by actuaries for actuaries.