Pension Annuities at a Record Low

Pension Annuities at a Record LowEarlier this month the Association of British Insurers revealed the annuities of all associated pension schemes. They claimed to have done so in order to create more transparency in the market and prevent potential pensioners from making a bad decision that will cost them a comfortable retirement.

The annuities of all the schemes were at record lows but the lowest two of the group were Scottish Widows and Clerical Medical.

The annuities for a pension pot of £18,000 was a staggering £839 a year. This is £260 lower that the best insurer which, according to the list, is Reliance Mutual with a yearly pay out of £1,099.

However a number of insurers have claimed that if you have been a smoker for over 10 years, you are more likely to get a higher pay out as you have a shorter life expectancy. For example, Reliance Mutual raise the pay out to £1,700 versus the previously mentioned £1,099.

Several factors are contributing to the plummeting annuity rates. The primary reason is that life expectancy is increasing year by year with innovations in healthcare. Another main cause is quantative easing due to the failing economy. The Bank of England said earlier this month that they will not raise interest rates until unemployment rates fall to 7% leaves the future of pensions bleak.

Recent studies show that in order to gain any value from your pension scheme, you must wait at least 25 years after the typical retirement age of 60 years old. This is problematic as, according to a WHO study in 2011, predicted life expectancy of a healthy male is 79 years of age.

This implies that nothing will be gained from current pension plans.

About John Cassidy

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