New research from My Pension Expert has revealed that numerous enhanced annuities have suffered over a 5% fall during the last two months. The study focused on a 64-year old with a pension pot of £100,000 and applied various lifestyle factors to their lifetime annuity, comparing the quotes between 12/08/14 and 21/10/14.
During this period the worst affected were those that smoked and those who are classed as obese, with their annuity rates falling by -5.279% and -5.442% respectively. On 12/08/14 the top quote for a smoker was £7199, this fell to £6819 on 21/10/14. That’s a loss of £380 in just over two months. The obese rate has been hit just as hard with the top rate on the 12/08/14 being £6689, falling to £6325 on 21/10/14 at a loss of £364.
When you factor in that the average retirement lasts for 19 years then suddenly the gulf between the two months becomes even more apparent. Someone who is obese will have lost out on £6,916 worth of income during their retirement, had they annuitized in October rather than August and a smoker would have missed out on £7,220. These large sums of money would make a significant difference to a retiree’s quality of life, whether it was used for a luxury purchase or to simply provide added financial security.
There are a number of reasons why annuity rates are falling at the moment. Interest rates are currently at historically low levels which in turn has caused gilt yields to fall. As gilt yields are intrinsically linked to annuity rates this fall has meant a drop in annuity rates too and the diminished demand for annuities following the Budget has only further exasperated the matter.
Scott Mullen director at My Pension Expert said:
“What these findings demonstrate is just how volatile the annuity market is currently. Rates are fluctuating on a daily basis and there could be a significant difference in income received annuitizing today versus annuitizing tomorrow. It is essential that those looking to purchase an annuity shop around for the best rate and make sure that it factors in their individual medical and lifestyle conditions.
“We would always recommend seeking advice as thanks to the recent Budget there are now even more options open to retirees that as a result have added further complications to the retirement process. An advisor can guide you through the procedure making sure that the right product is selected to suit your individual circumstances at the best rate available.”
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