Best of the Week
Most Popular
1.China Crash, Greece Collapse, Harbingers of Stock Market Apocalypse Forecast 2015? - Nadeem_Walayat
2.Gold Price Awaiting Outcome of Greece Crisis - Clive_Maund
3.Gold Price Peculiar 6 Month Cycles - Rambus_Chartology
4.Gold Price Just a Little Bit More - Bob_Loukas
5.8 Unprecedented Extremes Indicate a Stock Market Bubble in Trouble - EWI
6.Gold And Silver – Without Either, You Will Be Greeced - Michael_Noonan
7.Lies, Damned Lies and Statistics - James_Quinn
8.China Crash, Greece Crisis Harbingers of Stocks Bear Market? Video - Nadeem_Walayat
9.Gold and Silver Record Shorting - Zeal_LLC
10.Markets Big Deflationary Downwave Quick Reference Guide... - Clive_Maund
Last 5 days
Stock Market SPX Triggers Sell Signal - 3rd Aug 15
The Gold Investment Demand Juggernaut - 3rd Aug 15
Stock Market Pullback at Hand, Gold About to Rally? - 3rd Aug 15
Gold – The More Hate, The More Bullish We Become - 3rd Aug 15
Stock Market Critical Week Ahead - 3rd Aug 15
Gold Price Near Intermediate Bottom - 3rd Aug 15
Stock Market Reluctant Primary Wave IV? - 2nd Aug 15
Power and Compassion - 2nd Aug 15
Preparing for The Stock Market Crash - Inverse ETFs and Puts Timing... - 2nd Aug 15
Commodity Prices Slump Signals Slow Economic Growth Outlook - 2nd Aug 15
BSE Sensex Stocks Bear Market Underway - 2nd Aug 15
What Microsoft’s Dismal Earnings Report Really Tells You - 2nd Aug 15
Gold And Silver Charts Are The Compelling Story. Fundamentals Do Not Apply - 2nd Aug 15
The Fed Can't Stop the Commodity Bear Market - 1st Aug 15
Meet the Leader Who Turned Google Into a “Buy” - 1st Aug 15
The Greek Coup: Liquidity as a Weapon of Coercion - 1st Aug 15
Gold’s Amazing Resiliency - 31st July 15
Silver – A Century of Prices - 31st July 15
Demand for Gold Bullion Surges – Perth Mint, and U.S. Mint Cannot Meet Demand - 31st July 15
Reasons Why the Greek Crisis Will Only Get Worse - 30th July 15
The War On Cash: Why Now? - 30th July 15
Greece - The IMF Experts Flunk, Again - 30th July 15
Threat Of Cyber Warfare the “Other Reason To Own Physical Gold” Warns Rickards - 30th July 15
The 5 Biggest Myths and Lies about the Middle East - 30th July 15
Greece, Diversion, and the New World Order - 30th July 15
Ibuprofen Warning - The Pain Killer that can Kill You! - 29th July 15
More Ritholtz on Gold, and Another Response - 29th July 15
Crude Oil Price Is Lower – and You’re Richer - 29th July 15
U.S. Home Sales Market Is Dead – This Chart Proves It - 29th July 15
Greece- What Happens When Economists Talk Politics - 29th July 15
The Gold - U.S. House Prices Ratio As A Valuation Indicator - 29th July 15

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

Stock Market Bubble in Trouble

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