Best of the Week
Most Popular
1. Will Gold Price Breakout? 3 Things to Watch… - Jordan_Roy_Byrne
2.China Invades Saudi Oil Realm: PetroDollar Kill - Jim_Willie_CB
3.Bitcoin Price Trend Forecast, Paypal FUD Fake Cryptocurrency Warning - Nadeem_Walayat
4.The Stock Market Trend is Your Friend ’til the Very End - Rambus_Chartology
5.This Isn’t Your Grandfather’s (1960s) Inflation Scare - F_F_Wiley
6.GDX Gold Mining Stocks Fundamentals - Zeal_LLC
7.US Housing Real Estate Market and Banking Pressures Are Building - Chris_Vermeulen
8.Return of Stock Market Volatility Amidst Political Chaos and Uncertain Economy - Buildadv
9.Can Bitcoin Price Rally Continue After Paypal Fake FUD Attack? - Nadeem_Walayat
10.Warning Economic Implosion on the Horizon - Chris_Vermeulen
Last 7 days
Crude Oil Price Trend Forecast - Saudi's Want $100 for ARAMCO Stock IPO - 20th Apr 18
The Incredible Silver Trade – What You Need to Know - 20th Apr 18
Is War "Hell" for the Stock Market? - 19th Apr 18
Palladium Bullion Surges 17% In 9 Days On Russian Supply Concerns - 19th Apr 18
Breadth Study Suggests that Stock Market Bottom is Already In - 19th Apr 18
Allegory Regarding Investment Decisions Made On Basis Of Government’s Income Statement, Balance Sheet - 19th Apr 18
Gold – A Unique Repeat of the 2007 and How to Profit - 19th Apr 18
Abbeydale Park Rise Cherry Tree's in Blossom - Sheffield Street Tree Protests - 19th Apr 18
The Stock Market “Turn of the Month Effect” Exists in 11 of 11 Countries - 18th Apr 18
Winter is Coming - Coming Storms Will Bring Out the Best and Worst in Humanity - 18th Apr 18
What Does it Take to Create Living Wage Jobs? - 18th Apr 18
Gold and Silver Buy Signals - 18th Apr 18
WINTER IS COMING - The Ongoing Fourth Turning Crisis Part2 - 18th Apr 18
A Stock Market Rally on Low Volume is NOT Bearish - 17th Apr 18
Three Gold Charts, One Big Gold Stocks Opportunity - 17th Apr 18
Crude Oil Price As Bullish as it Seems? - 17th Apr 18
A Good Time to Buy Facebook? - 17th Apr 18
THE Financial Crisis Acronym of 2008 is Sounding Another Alarm - 16th Apr 18
Bombs, Missiles and War – What to Expect Next from the Stock Market - 16th Apr 18
Global Debt Bubble Hits New All Time High – One Quadrillion Reasons To Buy Gold - 16th Apr 18
Will Bitcoin Ever Recover? - 16th Apr 18
Stock Market Futures Bounce, But Stopped at Trendline - 16th Apr 18
How To Profit As Oil Prices Explode - 16th Apr 18
Junior Mining Stocks are Close to Breaking Downtrend - 16th Apr 18
Look Inside a Caravan at UK Holiday Park for Summer 2018 - Hoseasons Cayton Bay Sea Side - 16th Apr 18
Stock Market More Weakness? How Much? - 15th Apr 18
Time for the Gold Bulls to Show their Mettle - 15th Apr 18
Trading Markets Amid Sound of Wars - 15th Apr 18
Sugar Commodity Buying Levels Analysis - 14th Apr 18
The Oil Trade May Be Coming Alive - 14th Apr 18
Big Cap US Stocks Fundamentals - 13th Apr 18
Jaguar Land Rover Cuts 1000 Jobs on Diesel Sales Slump, Long-term Discovery Sport Review - 13th Apr 18
Stock Market SPX May Tangle with the 50-day MA - 13th Apr 18
Longtanding Chinese War: Intrigue & Betrayal - 13th Apr 18
How I Own My Gold - 13th Apr 18
ISupply Energy Consumer Warning - Never Put Your Account Into Credit! - 13th Apr 18
SPX Resistance May Prompt A Massive Short Squeeze - 12th Apr 18
Stock Market High Volatility is Not Consistently Bearish for Stocks - 12th Apr 18

Market Oracle FREE Newsletter

Trading Lessons

Another Poor Year for UK Annuity Rates

Personal_Finance / Pensions & Retirement Jan 11, 2016 - 04:00 PM GMT

By: MoneyFacts

Personal_Finance

New research from Moneyfacts has revealed that 2015 was another poor year for annuity rates as low gilts, uncertainty created by the new pension freedoms and preparations for Solvency II took their toll.

Annuity rates have more than halved since 1994

The research found that annuity rates in 2015 fell for the second year running, and have now declined in 17 out of the 21 calendar years since Moneyfacts started surveying the annuity market in 1994. During this period the average annual income payable from a standard level without guarantee annuity has fallen by a considerable 56%.


Annuity rates made the worst possible start to 2015 – January saw providers respond to all-time low 15-year gilt yields, leading to the biggest monthly fall in standard annuity rates that we have ever recorded. The average annual income payable on our benchmark annuity (standard, level without guarantee) for a 65-year-old with a pension pot of £10K therefore fell by 4.5% in January 2015 (and by 4.8% for a £50K pension pot).

Further rate reductions during March and April 2015 saw annuity rates fall to record lows just 17 days into the new pension freedoms regime, which was unfortunate timing for those individuals who may have deferred making a choice until the introduction of the new options and subsequently decided that an annuity was the most suitable product for them after all.

Rising gilt yields during the second quarter of 2015 sparked a recovery in annuity rates before a period of relative calm during quarter three 2015. However, annuity rates ended the year just as they had begun it with some sharp reductions during the last quarter.

As a result, the average annual income payable from a standard level without guarantee annuity for a 65-year-old fell by 3.1% at the £10K purchase point and by 5.6% at the £50K purchase point during 2015. Joint life standard annuities saw even bigger reductions, with rates dropping by as much as 7.7% in some cases.

Enhanced annuities see biggest falls

2015 was a particularly tough year for enhanced annuity pricing, with enhanced annuity rates being cut more severely than their standard annuity counterparts. The average annual income payable on an enhanced level without guarantee annuity for a 65-year-old fell by between 5.5% and 6.5%, depending upon the purchase price. As with standard annuity rates, joint life enhanced annuity incomes have seen even heavier falls, ranging from 7.5% to 12.6%, depending upon the escalation option chosen.

Gilt yields

Low gilt yields have once again been instrumental in driving down annuity rates during 2015. The ability of annuity providers to withstand the pricing pressures of lower gilt yields has been hampered by the reduced demand for annuities since the introduction of the new pension freedoms.

Factoring in Solvency II

As well as the monumental change delivered by the new pension freedoms, annuity providers have also had to prepare for the implementation of Solvency II, the new European-wide rules that set out the levels of capital that insurance companies must hold. These came into effect from 1 January 2016.

Richard Eagling, Head of Pensions at Moneyfacts, said:

“Although Solvency II has been in the pipeline for 10 years, delays in the final set of rules and to the approval of the ‘internal models’, which allow insurers to modify the standard rules to better fit their own circumstances, meant that most annuity providers were not able to fully factor Solvency II requirements into their rates until the final months of the year.

“Unfortunately, just as annuity providers began to price in their Solvency II requirements, gilt yields fell, a combination of events that saw average standard annuity income fall by between 2.7% and 3.3% during November and December, while average enhanced annuity income reduced by between 2.7% and 3.5%. Echoing the trend we saw in the annuity market ahead of the switch to gender neutral pricing in December 2012, annuity providers have once again erred on the side of caution with their pricing, with providers reluctant to price too far ahead of the competition.

“2015 proved to be another difficult year for annuity rates with providers forced to stay on their toes and cut rates in order to react to low gilt yields, the reduced business volumes brought about by pension freedoms and the need to fully factor in the new Solvency II requirements. The fact that annuity rates have more than halved over the last two decades shows the challenge that will continue to face retirees looking for a retirement income in the year ahead.”

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.


© 2005-2018 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

6 Critical Money Making Rules