Best of the Week
Most Popular
1.Election Forecast 2015 - Opinion Polls Trending Towards Conservative Outright Win - Nadeem_Walayat
2.UK Solar Eclipse - End Time Sign, Judgement Day, Doomsday! - Nadeem_Walayat
3.Gold And Silver - When Will Precious Metals Rally? Not In 2015 - Michael_Noonan
4.Preparing for the Next Stocks Bear Market - Forecast 2015-2016 - Gary_Savage
5.Is a Stock Market Crash Imminent? - David Eifrig
6.Gold Price Slumps as US Dollar Soars, What's Next? - Nadeem_Walayat
7.US Dollar Forex Pairs and Gold Chartology - Rambus_Chartology
8.Election Forecast 2015: The Day Labour Lost the General Election - Nadeem_Walayat
9.The ECB Should End QE Next Month - EconMatters
10.Silver Price Poised to Surge - Zeal_LLC
Last 5 days
How Stock Investors Should Play the 2016 Presidential Race - 26th Mar 15
MidEast Energy Alert: Why the Crisis in Yemen Could Get Ugly Very Fast - 26th Mar 15
Stock Market Downward Spiral of Dumbness - 26th Mar 15
The Monetary Approach Reigns Supreme - 26th Mar 15
Stock Market Large Gap Down, Despite the Algos' Push Back - 26th Mar 15
Crude Oil Surges, Gold price Spikes as Middle East Tensions Escalate - 26th Mar 15
The U.S. Housing Market Recovery Is Fabricated Optimism - 26th Mar 15
Why Yemen Is The Next Saudi-Iranian Battleground - 26th Mar 15
The Crude Oil Price Crash and China Economic Slow Down - 26th Mar 15
Global Financial Markets Are More Distorted Than Ever Before - 26th Mar 15
One More Stock Market Rally and Then a Huge Drop Expected - 26th Mar 15
Danger Will Robinson - Stock Market Crash Warning - 25th Mar 15
Learn the Basics of Corrective Elliott Waves - 25th Mar 15
Why CNBC Is Hazardous to Your Financial Health! - 25th Mar 15
Will Your Retirement Accounts Survive The Coming Tax Code "Revolution"? - 25th Mar 15
US Dollar - Americas Phoenix - 25th Mar 15
California’s Epic Drought: Only One Year of Water Left! - 25th Mar 15
What’s Wrong With Silver? - 25th Mar 15
SPX Futures Appear Weak. WTIC and Gold May Be at Max Retracement - 25th Mar 15
We’re at the Dawn of a “New Energy Age” - 25th Mar 15
A Very Weak U.S. Economic Recovery - 25th Mar 15
Zero UK CPI Inflation Rate Prompts Deflation Danger Propaganda For Fresh Money Printing - 25th Mar 15
Stock Market NYSE Hi-Lo Index Aggressive Sell Signal - 24th Mar 15
Palladium Commodity Price Forecast - 24th Mar 15
Bitcoin Price Gearing Up for a Fall - 24th Mar 15
Safety Deposit Boxes In UK Being Closed By ‏HSBC – Not Closing Gold Vaults - 24th Mar 15
Japan Short Term Gains And Long Term Disaster - 24th Mar 15
China's Fragile Evolution - 24th Mar 15
David Cameron Announces Resignation Even Before Being Re-elected, Handing Labour 6 Seats - 24th Mar 15
City of London's Ownership of American Colonies - 24th Mar 15
Stock Market Reversal May Have Begun - 24th Mar 15
Casey Gathers Top Gold Experts to Share Secrets for Making Money in Any Market - 24th Mar 15
Thoughts on The Current Crude Oil Market - 24th Mar 15
U.S. Economy Still on Life Support - What Your Governments Hiding From You... - 24th Mar 15
UK Election Forecast 2015 - Budget Bribes Fail, SNP Insurgency Catastrophe - Video - 24th Mar 15
Is Stock Market Minor Top Taking Hold? - 23rd Mar 15
Greece and EU Running Out of Time as Bank Runs Intensify - 23rd Mar 15
Stock Market Slightly Negative Expectations Following Last Week's Rally - 23rd Mar 15
This Rising Interest Rates Play Could Make You a Quick 55% - 23rd Mar 15
Platinum Commodity Price False Break Low - 23rd Mar 15
The Real Reason The American Dream is Unraveling - 23rd Mar 15
Election Forecast 2015 - Budget Bribes Fail to Impress Voters, Tory's Lose Seats in Opinion Polls - 23rd Mar 15
Silver Price Reliance During U.S. Dollar Rally - 23rd Mar 15
Gold Price Outlook Dramatic Improvement Following US Dollar Topping Action - 23rd Mar 15
Wall Street Doesn't Want You to Do This - 22nd Mar 15
The "Natural Interest Rate" Is Always Positive and Cannot Be Negative - 22nd Mar 15
Exploring The Gold Market: The Fed, The Charts. The COTS and GLD - 22nd Mar 15
Stocks Bull Market Continues - 22nd Mar 15
Gold And Silver - China's AIIB Spells U.s. Dollar Demise, Not Clear For Precious Metals - 22nd Mar 15
Cocoa Commodity Price Technical Outlook - 21st Mar 15
Yield Curve, Futures, Suggest No U.S. Interest Rate Hike Until December - 21st Mar 15
Three Iconic Stocks Are Poised for a Dive - 21st Mar 15
We're All Hedge Funds Now! - 21st Mar 15
Why Stock Market Seasonality May Be Critical in 2015 - 20th Mar 15
Yellen's Tiger Riding Dilemma Keeps Interest Rates Near Zero - 20th Mar 15
FOMC is boxed in, Gold and Silver - 20th Mar 15
Silver Price Poised to Surge - 20th Mar 15
Why Aren’t These Investors Worried About The Gold Price? - 20th Mar 15
Gold Price Downside $850/oz; Upside Jump to $2,000/oz on ‘Grexit’ - 20th Mar 15
Cheap Paper Money - Precious Metals Technical Outlook - 20th Mar 15
Best Cash ISA vs Budget 2015 Scrapping Tax on Savings Interest on First £1,000 - 20th Mar 15
GDXJ / Gold Ratio - 20th Mar 15
What the “Yellen Effect” Ultimately Means for Crude Oil - 20th Mar 15
Sharp Fall In USD Index And Its Implications - 20th Mar 15
UK Solar Eclipse - End Time Sign, Judgement Day, Doomsday! - 19th Mar 15
How Many Shale Oil Plays Make Money At $37 Per Barrel? - 19th Mar 15
Gold Price Rises 2.1% – Fed Signals Loose Monetary Policies to Continue - 19th Mar 15
The Hottest Investment Opportunities in Tech Stocks Sector Right Now - 19th Mar 15
China's Deflationary Economic Bust and Beyond: Anne Stevenson-Yang Presentation - 19th Mar 15
T-Mobile CEO: "Sprint couldn't give away service...their network is completely dead" - 19th Mar 15

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

US Economy Still on Life Support

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

Free Report - Financial Markets 2014