It pays to take a risk in retirement

Source: The Sunday Times

With rates so poor, experts advise looking for alternatives at retirement.

Few people would think about fixing their mortgages for two decades, but most of us still lock our retirement income into a fix for 20-plus years — even though the rates available offer appalling value for money.

Pension experts say it is now time for a radical rethink of how we fund retirement.

Annuity rates have been creeping up, rising 6% over the past three months and 12% since the start of the year. They are now at their highest level since 2011.

However, the payouts remain extremely poor. Someone retiring at 65 with a £100,000 pension fund can secure an income of just £6,252 a year, according to Hargreaves Lansdown, with some annuity providers paying far less. This will not increase with inflation, nor will it pay a pension to any surviving spouse.

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Annuity rates recover to two-year high in Q3

Pension payout rates have soared to a two-year high – bringing a welcome boost to millions of workers planning for retirement.

Figures yesterday revealed that people buying an annuity now will get 11 per cent more than this time last year.

Pensions have been squeezed by falling investments, a record low base rate of 0.5 per cent and the Bank of England’s money printing ­programme, which has pushed down the price of Government bonds and damaged annuity rates.

In November 1991 average rates were over 14 per cent. Today they are around 5.8 per cent.

The MGM Advantage Annuity Index showed rates increasing by six per cent in the third-quarter of the year, the largest quarterly increase since August 2009.

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Gender equality rules means women can get 12 per cent more retirement income from annuities than last year

By Adam Uren, The Mail Online

Women buying an annuity can get a retirement income 12 per cent higher now than before 'gender neutral' pricing was introduced just under a year ago.

Annuity rates have been on the rise since the turn of the year as a result of improved investment returns on the bonds and gilts that underpin them, but it is women who have benefited most thanks to EU rules introduced last December.

These gender equality rules meant insurance companies are not allowed to discriminate because of sex when offering to convert pensions into annuity incomes.

But once the EU rules were brought in this could no longer be taken into account, meaning women's rates rose and men's fell as the prices equalised.

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Will annuity rates keep rising?

Rising gilt yields should carry a silver lining for those looking to buy retirement income through an annuity. 

What does the future hold for annuity buyers? One the one hand, rates have improved dramatically in recent months; on the other there are fears that the Bank of England will keep a tight lid on interest rates, which could mean that annuity rates will struggle to go any higher – or could even start falling again.

To assess what is likely to happen, we need to look at how annuity rates are tied to other important benchmarks in the financial markets and what has caused the recent improvement. Then we’ll see how likely it is that this rise will continue.

•  Why gilt pricing is so crucial to pensioners?
•  Where are gilt yields going now?
• So what next for annuity rates? 

To find out more, read the full article from The Telegraph by following this link.



Author: Richard Evans, The Telegraph

'Force annuity firms to treat all customers equally'

Annuity providers should be forced to offer existing customers the same rates as those given to new customers, a leading insurer has said. 

Aviva called on the City regulator to force all pension providers to offer the same annuity rates to "internal" and "external" customers.

Internal customers are annuity buyers who took out their pensions savings product with the same insurer; external customers saved with a different company before using their pension pot to buy an annuity elsewhere. Those who do shop around are said in industry jargon to be exercising the "open market option".

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