Best of the Week
Most Popular
1.UK General Election BBC Exit Polls Forecast Accuracy - Nadeem_Walayat
2.UK General Election 2017 Seats Final Forecast, Labour, Conservative Lib-Dem, SNP - Nadeem_Walayat
3.UK General Election 2017 Forecast: Conservative 358, Labour 212 Seats - Nadeem_Walayat
4.Theresa May to Resign, Fatal Error Was to Believe Worthless Opinion Polls! - Nadeem_Walayat
5.UK House Prices Forecast General Election 2017 Conservative Seats Result - Nadeem_Walayat
6.The Stock Market Crash of 2017 That Never Was But Could it Still Come to Pass? - Sol_Palha
7.[TRADE ALERT] Write This Gold Stock Ticker Down Now - WallStreetNation
8.UK General Election Results Map 2017 vs 2015 vs Opinion Polls - Nadeem_Walayat
9.Orphaned Poisoned Waters,Severe Chronic Water Shortage Imminent - Richard_Mills
10.How The Smart Money Is Playing The Lithium Boom - OilPrice_Com
Last 7 days
Gold and Silver Ongoing Consolidation May End Soon - 24th Jun 17
Dollar May Become “Local Currency of the U.S.” Only - 24th Jun 17
Sheffield Great Flood of 2007, 10 Years On - Unique Timeline of What Happened - 24th Jun 17
US Stock Market Correction Could be Underway - 24th Jun 17
Proof That This Economic Recovery Narrative is False - 24th Jun 17
Best Cash ISA for Soaring Inflation, Kent Reliance Illustrates the Great ISA Rip Off - 24th Jun 17
Gold Summer Doldrums - 23rd Jun 17
Hedgers Net Short the Euro, US Market Rotates; 2 Horsemen Set to Ride? - 23rd Jun 17
Nether Edge By Election Result: Labour Win Sheffield City Council Seat by 132 Votes - 23rd Jun 17
Grenfell Fire: 600 of 4000 Tower Blocks Ticking Time Bomb Death Traps! - 22nd Jun 17
Car Sales About To Go Over The Cliff - 22nd Jun 17
LOG 0.786 support in CRUDE OIL and COCOA - 22nd Jun 17
More Stock Market Fluctuations Along New Record Highs - 22nd Jun 17
Understanding true money, Pound Sterling must make another historic low, Euro and Gold outlook! - 22nd Jun 17
Green Party Could Control Sheffield City Council Balance of Power Local Election 2018 - 22nd Jun 17
Ratio Combo Charts : Hidden Clues to the Gold Market Puzzle - 22nd Jun 17
Steem Hard Forks & Now People Are Making Even More Money On Blockchain Steemit - 22nd Jun 17
4 Steps for Comparing Binary Options Providers - 22nd Jun 17
Nether Edge & Sharrow By-Election, Will Labour Lose Safe Council Seat, Sheffield? - 21st Jun 17
Stock Market SPX Making New Lows - 21st Jun 17
Your Future Wealth Depends on what You Decide to Keep and Invest in Now - 21st Jun 17
Either Bitcoin Will Fail OR Bitcoin Is A Government Invention Meant To Enslave... - 21st Jun 17
Strength in Gold and Silver Mining Stocks and Its Implications - 21st Jun 17
Inflation is No Longer in Stealth Mode - 21st Jun 17
CRUDE OIL UPDATE- “0.30 risk is cheap for changing implication!” - 20th Jun 17
Crude Oil Verifies Price Breakdown – Or Is It Something More? - 20th Jun 17
Trump Backs ISIS As He Pushes US Onto Brink of World War III With Russia - 20th Jun 17
Most Popular Auto Trading Tools for trading with Stock Markets - 20th Jun 17
GDXJ Gold Stocks Massacre: The Aftermath - 20th Jun 17
Why Walkers Crisps Pay Packet Promotion is RUBBISH! - 20th Jun 17
7 Signs You Should Add Gold To Your Portfolio Now - 19th Jun 17
US Bonds and Related Market Indicators - 19th Jun 17
Wireless Wars: The Billion Dollar Tech Boom No One Is Talking About - 19th Jun 17
Amey Playing Cat and Mouse Game with Sheffield Residents and Tree Campaigners - 19th Jun 17
Positive Stock Market Expectations, But Will Uptrend Continue? - 19th Jun 17
Gold Proprietary Cycle Indicator Remains Down - 19th Jun 17

Market Oracle FREE Newsletter

The MRI 3D Report

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.


© 2005-2017 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

Catching a Falling Financial Knife