Annuity Rates See an increase
Yes its true some silver lining in the annuity market with an increase in annuity rates being acknowledged by the wider press in recent days. Although if you have regularly read the vies on these pages you will have seen that we at RetireRight have said this has been happening gradually over the last few months based on our own analysis.
Since Decemeber 2012 annuity rates have increased by 5.2% according to the MGM Annuity index and 2.4% in the last quarter. Aston Goodey from MGM Advantage said “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.”
These comment reflect the exact same analysis made by RetireRight over the last few blogs, the reason for the decline in late 2012 was the rush to beat the gender directive meaning many man decided to start their annuity before 21st Decemeber 2012 in anticipation of a drop in rates after this date. In all fairness the drop came in the months before December and the market has essentially corrected itself in 2013.
Aston went on to say “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.”
When asked about Annuity trends Aston went on to say “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.”
The same stance remains you retire when you retire and you can’t choose when you hit 60 or 65 so you have to plan in the years preceding this date and try and start taking income at a suitable time so that you get the best rate but dont start paying too much tax on the income. Essentially there are so many options and reasons for doing one thing over another that the best thing to do is take specialist Retirement advice as it can save you a fortune in doing the wrong thing.