Annuities destined for worst ever year

According to the figures published by Moneyfacts, based on a typical standard level without guarantee annuity, the average annual income for a 65-year-old has fallen by 14.8 per cent on a £10,000 purchase price and by 15 per cent on a £50,000 purchase price so far this year.

This means that someone who bought an annuity with a £10,000 pension pot would now get 14.8 per cent less in income than if they’d purchased one at the end of 2015.

The dramatic falls easily surpass the previous highest annual income fall of 11.5 per cent recorded in 2012 (see the table below).

Moneyfacts, whose own whose records go back to 1996, said that although there are more than three months of the year remaining, it is unlikely that the current economic situation will change too much in that time; as a result, it’s unlikely that there’ll be a strong enough recovery in annuity rates to avoid it being crowned the worst ever year.

“2016 has been a truly awful year for annuity rates, with rates falling to all-time lows,” said Richard Eagling, head of Pensions at Moneyfacts. “This is particularly disappointing as the stock market volatility that we are experiencing has re-emphasised the importance of a secure lifetime income for many retirees.

“Unfortunately, record low gilt yields following the EU referendum result, the impact of Solvency II legislation and a significant weakening of competition in the annuity market have all exerted considerable downward pressure on annuity rates during 2016.”