Best of the Week
Most Popular
1.Will UK Interest Rate Rises Crash House Prices? - Nadeem_Walayat
2.Full on Crash Alert for Major World Stock Markets... - Clive_Maund
3.Gold And Silver Market Bottoming? Big Rally Imminent? Reality Check Says NO - Michael_Noonan
4.The Coming Silver Price Rally Will Outperform All Previous Ones - Hubert_Moolman
5.The Trigger For The Upcoming Stock Crash - Harry_Dent
6.Imploding Department Store Results - James_Quinn
7.Dr. Copper is Speaking, are you Listening? ... - Rambus_Chartology
8.Pandemonium in the Stock Market, Dow falls 1,000 points in a week - EWI
9.Asia's Whirling Dervish of Devaluations Has Encircled China's Exports - Keith_Hilden
10.China Weakens the Yuan; Rattles Global Stock and Financial Markets - Gary_Dorsch
Last 5 days
OPEC Divorce And Self-Destruction Thanks To Saudi Crude Oil Strategy? - 1st Sept 15
The Beginning Of A New Financial / Stock Market Cycle - 1st Sept 15
Three Things Every Master Trader Knows About Trading Options - 1st Sept 15
Chinese Yuan Revolution? - 1st Sept 15
Take Advantage of Record-High Auto Sales… Before This Bubble Bursts - 1st Sept 15
Pondering Hitler's Legacy - 1st Sept 15
Mainstream Media Goes Berserk - 1st Sept 15
Your Decisive Stock Market Plan to Follow Whilst Most Investors Shiver With Fear - 1st Sept 15
Are There Stock and Financial Markets Investing Opportunities For The Remainder Of 2015 - 1st Sept 15
Crude Oil Price Forecast 2015 and 2016 - 1st Sept 15
REPO Window Hidden $Trillion QE Monthly Volume - 31st Aug 15
Silver and Warnings From Exponential Markets - 31st Aug 15
Stock Market Calls Fed’s Bluff - 31st Aug 15
Why Some ETFs Led the Stock Markets Down Last Week - 31st Aug 15
Stock Market Collapse - Take The Opportunity To Bail Before It’s Too Late! - 31st Aug 15
The Most Important Market Chart on The Planet - 31st Aug 15
Stock Market 50% Retracement - 31st Aug 15
Stock Market Crash Red Alert for 2nd Downwave... - 31st Aug 15
Independant Scotland 1 Year on, UK Civil War If the SNP Fanatics Had Succeeded - 30th Aug 15
Gold’s 7 Point Broadening Top - 30th Aug 15
The Day the Stock Market Shook the Earth: Takeaways From the Dow’s 1,000-Point Drop - 30th Aug 15
Gold Price Rally Marked by Short Covering - 30th Aug 15
Aging Stocks Bull Market - 29th Aug 15
Economic Destabilization, Financial Meltdown and the Rigging of the Shanghai Stock Market? - 29th Aug 15
The Stocks You Should Be Buying After the Market Drop - 29th Aug 15
How I Learned to Stop Worrying and Love Market Fluctuations - 28th Aug 15
China's Yuan Devaluation: Why It Was "Expected" - 28th Aug 15
Stocks Go Nuts But the Question Remains – Will the Rally Stick? - 28th Aug 15
Fed’s Stock Market Levitation is Failing - 28th Aug 15
The Eight Energy Systems Driving The Stock Market Rout - 28th Aug 15
Silver Sold, then Squeezed - 28th Aug 15
U.S. Economic Fundamentals 'Look Good' - Bullard of St. Louis Fed - 28th Aug 15
Stock Market Margin Calls Mount - 28th Aug 15
Einstein, Physics, Gold and The Formula To End Economic Decay - 28th Aug 15
The 10 Best Stocks for Options Trading Plays in This Market - 28th Aug 15
Economics of a Stock Market Crash - 28th Aug 15
Currency Wars Detonate; Gold Refuses to Budge - 28th Aug 15
UK Immigration Crisis Hits New Record, Trending Towards Becoming a Catastrophe - 28th Aug 15
The Ultimate Cash-Management Guide - 27th Aug 15
Why a Fed Rate Hike Could Be a Blessing for Gold Prices - 27th Aug 15
Why Devaluing the Yuan Won't Help China's Economy - 27th Aug 15
Stock Market Trend & Trade Signal Of the Decade - 27th Aug 15
Keep Your Eye On the Gold and Silver Bear - 27th Aug 15
Refugees Expose Europe’s Lack Of Decency - 27th Aug 15
How to Profit from China's Currency War - 27th Aug 15
How China's Currency Policies Will Change the World - 27th Aug 15
Chinese Medicine not Impressing Dr Copper - 27th Aug 15
Novel Biotech Novel Technology Platforms with Dramatic Growth Potential - 27th Aug 15
China Stocks Bear Market Crash, Are We Near the Bottom Yet? - 27th Aug 15

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

Global Stocks Slide

UK Pension Annuity Income Suffers Biggest Fall Since 1998

Personal_Finance / Pensions & Retirement Jan 09, 2013 - 05:48 AM GMT

By: MoneyFacts

Personal_Finance

New research by Investment Life and Pensions Moneyfacts has revealed that the average annual income generated by a standard annuity for a 65-year old male fell by 11.5% during 2012. This is the biggest annual fall since 1998, when annuity income fell by an average of 13.7% (see Table 1 below).

The equivalent annuity income for a female dropped by 6.1% in 2012, a fall that was cushioned by the uplift that females received on the switch over to gender neutral pricing from 21 December 2012.


Table 1: Average Annual Change in Pension Annuity Income since 1998 (Source: Investment Life and Pensions Moneyfacts. Figures based on a male aged 65 purchasing a standard, level without guarantee annuity)

to be another poor year for annuity rates. Record low gilt yields sparked by further Quantitative Easing and uncertainty over the Eurozone combined with the switch to gender neutral pricing led to a high volume of repricing amongst annuity providers throughout 2012. The result of this activity has been a fifth consecutive year in which average annuity income has fallen.”

Average annuity income has now fallen in 15 out of the last 18 calendar years. Overall, the average annual annuity income for a male aged 65 years old has fallen by 56% since Moneyfacts first started to research annuity rates back in August 1994, whilst the equivalent income for a 65-year-old female has reduced by 50%.

Impact of switch to gender neutral rates

Table 2 below compares the average annual income payable on pension annuities both before and after providers switched to unisex rates as part of the EU Gender Directive. The figures are based on a purchase price of £50K.

As the table highlights, the move to unisex rates has seen the average annual income payable on a standard level without guarantee annuity for a male aged 65 fall by 2.7%, from £2,690 to £2,617. The income payable on other types of annuity for a 65- year-old male have seen slightly lower reductions: 2.6% for a level guaranteed five year annuity, 2.4% for a RPI-linked without guarantee annuity, 2.1% for a level guaranteed 10-year annuity and 1.8% for an escalating 5% per annum without guarantee annuity.

Females, widely predicted to be the big winners in the new gender neutral landscape, have certainly benefited, although the average uplift they have witnessed in many cases mirrors the reductions seen by their male counterparts. For instance, the average annual income payable on a standard level without guarantee annuity for a female aged 65 years old has increased by 2.9% from £2,542 to £2,617.

Generally speaking, the impact of gender neutral pricing has been less pronounced for joint life cases. Where joint life annuities are priced on a no reduction on first death basis there has been very little change unless an escalation option is chosen. Meanwhile, joint life annuities reducing by one-third on the male death have fallen by between 0.2% and 0.8% depending on the options selected.        

Richard Eagling, Head of Pensions at Moneyfacts, said: “As to the future direction of annuity rates, it is fair to say that the full impact of the switch to gender neutral pricing has yet to play itself out. It is still very early days for the new pricing model and in the short term a period of considerable flux is anticipated as providers look to readjust their rates during the first quarter of 2013 in order to drop themselves back into the strategic pricing positions they favoured before gender neutralisation. This process is already underway, with several providers making price adjustments within a short period of introducing their gender neutral rates.”

Table 2: Single Life Standard Annuity – Average annual pension annuity income pre and post G-Day. (Annuity rates based on £50K purchase price)

www.moneyfacts.co.uk - The Money Search Engine

Moneyfacts.co.uk is the UK's leading independent provider of personal finance information. For the last 20 years, Moneyfacts' information has been the key driver behind many personal finance decisions, from the Treasury to the high street.


© 2005-2015 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

Biggest Debt Bomb in History