The Telegraph has reported of experts warning that the value of pension’s pots is in ‘freefall’ due to record drops in annuity rates. This fall in retirement income will hit thousands and thousand of already struggling pensioners who have high inflation and low interest rates on their savings.
Annuities are bought with a person’s pension pot when approaching retirement, it determines savers an annual income for the remainder of their life. The bad news is that the value of these annuities has plunged by 7% in just the last three months.
To explain it in figures, the value of the annuities of a retiring person with a £50,000 pension pot would be able to buy an annual retirement income of £2579.00 – however just a few months ago, in July, it could have been an annual income of £2778.00!
This recent fall is the largest quarterly drop since reports began in 2009 and they are causing much concern for experts, pensioners and the general public alike.
Joanne Segars, Chief Executive of the National Association of Pension Funds has said that annuities have really taken a hammering. Lord McFall is the Former Chairman of the Treasury Select Committee and he agrees with Joanne saying the UK is digging a pension pit for itself.
Aston Goodey is the Marketing and Distribution Director at MGM Advantage he feels that saves are stuck between a rock and a hard place with the annuity rates at an all time low. He feels that some people are in a position to hold off from converting their pensions into their income in hope that the rates will improve however others will need to generate an income now, these people will struggle.
We spoke to Jonathon Crisp of Annuity Market Place to see what his thoughts on the matter were. Jonathon said;
“This is an unfortunate side effect of the government’s efforts to shore up the financial system, not only are those with savings seeing the rates of interest received at record lows, it is now even more difficult to maintain your income in retirement with a modest pension fund, making it even more important to use the open market option at retirement to ensure you are getting the highest pension possible”.