Falling annuities deliver another blow to retirees
Annuity payouts slumped by 11.5 per cent last year, their biggest fall since 1998. Rates have now fallen in 15 out of the past 18 years and the average annual annuity income is less than half what it was in 1994, according to Moneyfacts.
The company blamed the latest fall on the record low gilt yields resulting from quantitative easing and uncertainty over the eurozone. The switch to gender-neutral pricing in December also had an effect, although Richard Eagling of Moneyfacts said: "The full impact of the switch to gender neutral pricing has yet to play itself out."
The lower rates mean a 65-year-old man with a £50,000 pension pot will get £274 less now compared with a year ago.
Meanwhile research from Prudential shows that people planning to retire this year expect to have to live on £15,300 a year. The figure is £3,400 lower than in 2008.
Today's announcement about the future of the retail prices index (RPI) by the Office for National Statistics could herald further bad news for pensioners. The National Statistician, Jil Matheson, is expected to recommend that RPI be adjusted to bring it more into line with the lower consumer prices index (CPI). With many annuities linked to RPI, the change could have a disastrous effect on retirement incomes.
According to the pensions expert Tom McPhail at Hargreaves Lansdown, the switch could leave someone with a £100,000 pension pot £9,500 worse off over 20 years. "While a difference of less than 1 per cent can seem small, over the course of a retirement this can have large effects," he warned.
- 2 How the language you speak changes your view of the world
- 4 Italian police 'reveal' what Jesus looked like as a young boy
'Fire at every person you see': Israeli soldiers reveal they were ordered to shoot to kill in Gaza – even if the targets may have been civilians
Italian police 'reveal' what Jesus looked like as a young boy
Who should I vote for? The Independent quiz matches best political party for undecided voters ahead of the general election
First-time buyers in London 'need to earn at least £77,000'
General Election 2015: Photographic history of Bullingdon Club tracked down - including new picture of David Cameron in his finery
In defence of liberal democracy
Over 50,000 families shipped out of London boroughs in the past three years due to welfare cuts and soaring rents
EU asylum policy is 'a direct threat to our civilisation', says Nigel Farage
The Rothschild Libel: Why has it taken 200 years for an anti-Semitic slur that emerged from the Battle of Waterloo to be dismissed?
General Election 2015: UK will be 'run for the wealthy and powerful' if Tories retain power, Labour warns
Schools forced to act as 'miniature welfare states' with teachers buying underwear and even haircuts for poor pupils
iJobs Money & Business
£20000 - £25000 per annum + Uncapped commission: SThree: Can you speak German,...
£25000 - £30000 per annum + benefits: Ashdown Group: An exciting opportunity f...
£215 per day: Ashdown Group: Junior Project Manager (website, web application ...
£40-50K: Guru Careers: We are seeking an experienced Software Engineer / Softw...