Yahoo finance

Brexit has added to the pains of those savers wanting to buy income in the form of annuities, with the referendum outcome pressing down payout rates by almost 4pc.
Since the referendum, more than a dozen negative rate adjustments have been announced, and a standard terms annuity now offers an income of just £4,890 on a fund of £100,000, according to Hargreaves Lansdown.
But that was small beside the longer-term decline : payouts are down 37pc since 2008.
Annuity payouts reflect returns on government bonds, or gilts, which have been depressed in the years since the financial crisis as investors have piled into the bonds and driven down their yields.
Eight years ago, a 65 year old with a £100,000 pot could have bought an income of £7,855.
Just six months ago in January, a 60 year old could get a better deal than a 65 year old can today: then, a £100,000 could have bought an income of £4,930. That means they would have received five extra years of income compared to what a 65 year old would get today.
Tom McPhail, head of retirement policy at Hargreaves Lansdown, said: “Annuity rates are disappearing off the bottom of the chart. There is no certainty whether or when rates will go back up again.
“It is also important to note that in recent years, anyone who decided to delay buying an annuity may well be worse off today.”
He suggested that anyone planning to buy an annuity shouldn’t delay because rates today are lower than the past.
“For many investors a mix and match strategy , putting some of their pension into an annuity and leaving some invested, may well be the best approach,” he said.
Providers such as Legal & General, Standard Life and Retirement Advantage have all cut annuity rates since the referendum result was announced.
Those hoping to take a pension lump sum right now have been urged to wait , as market volatility could see them take their pension at a time when the pot value is temporarily down.
Kate Smith, head of pensions at asset manager Aegon, explained that gilt yields, corporate bond rates and life expectancy are the factors driving down annuity rates. Low gilt and bond rates reduce the level of predictable income annuity insurers can produce.
And the increasing life expectancy of annuitants means providers are likely to pay less per year.
She said: “The stock market has recovered a great deal since the depths of the financial crisis, and some pensions savers and drawdown investors will have done well out of the bounce in equity markets.” However, she added that retirees have had to contest with either the prospect of either market uncertainty if they leave their money invested, or the certainty of a low annuity rate.
Ms Smith urged people to hold off making decisions about buying an annuity to avoid locking into a lower income.
Or, where possible, they could consider putting off retirement and continuing to save in case annuity rates bounce back.
She said: “If they need a retirement income now they could consider opting for draw-down, which allows people to keep their money invested in the markets and take an income.

FT.com

Campaigners are urging the government to set up a new comparison tool for the pensions market after a study found only a third of investors buying new pension products had shopped around.
Seven out of ten people accessing their pension cash since new freedoms came into force did not shop around, potentially missing out on the best deals, said Citizens Advice, the debt charity.

Dailymail.co.uk

Savers who retire this month face receiving pension income that is up to 13 per cent lower than what they could have obtained a year ago.
Payouts on annuities have crashed to an all-time low over the past year, according to figures from data firm Moneyfacts.
In January 2015, a 65-year-old saver would have received £2,727 a year in exchange for their £50,000 nest-egg. But this month the figure has plunged to £2,573 — a 5.6 per cent fall.
In a further blow, those hardest hit will be savers looking for pensions that account for their health conditions.
So-called enhanced annuities typically give a higher income, but payouts have plunged by between 5 per cent and 13 per cent over the past year, the analysis showed.
Experts say the fall is down to a combination of factors, including new European rules that force firms to hold more cash on their books rather than doling it out.
This means pension companies must claw back extra costs from customers.

Yahoo finance
New FCA data shows just 13pc of savers are choosing to turn their pot into a guaranteed income via an annuity
Nearly nine in ten savers accessing their retirement pots under the pension freedoms are using new flexible arrangements, new data has revealed.
Financial Conduct Authority (FCA) shows just 13pc of savers are now buying annuities to turn their fund into an income in retirement.
• Pension freedoms: 2.2m face charges to access money
• £17m a day withdrawn under new pension freedoms
A total of 178,990 pensions were accessed during the three-month period, and 68pc of these, amounting to 120,969 pensions, were fully encashed.
The remaining 32pc of pensions that were accessed were taken to provide an income.
Most (88pc) of the pensions where the money was fully taken out were worth less than £30,000, the FCA said. Another worrying trend is for the majority of consumers continue not to shop around for the best deals, despite the clear benefits of doing so.
Concerns were raised about the number of people not taking financial advice, or using the Government’s Pension Wise service.

Retired savers waiting to re-sell their their annuities face prohibitive costs ahead of Government plans to introduce an ‘annuity marketplace’.
Under the proposals, pensioners who have already used their pension funds to buy an “annuity”, which pays an income for life, will be able to sell their deals in return for a cash lump sum. The “second-hand” pensions market will be made available in 2017.
The Government is understood to favour a free market in which savers put their annuity contract up for sale and insurance companies bid against each other.
The customer then receives a lump sum from the highest bidder. In exchange, the insurer collects the income stream attached to the saver’s annuity. However, experts have warned that the cash offers may be lower than customers hope. The income stream stops when the customer dies – as a result, people whose health has deteriorated may receive only a paltry offer.
The cost of advice is likely to exceed £1,000 for most people, experts said.

Telegraph.co.uk

A report from the Organisation for Economic Co-operation and Development (OECD) identifies Britain’s state pension as one of the world’s least generous, paying out on average of 38 per cent of what a recipient earned. Across 34 countries, only Mexico and Chile are more miserly. Even the Government’s “triple lock” policy, which raises the state pension by whichever is highest of inflation, earnings growth or 2.5 per cent, fails to find favour with the OECD. However, countries around the world are struggling to maintain the value of state pensions, and the chances that any of them will be able to sustain current levels with people living longer are slim.
telegraph.co.uk

Most people will be better off gradually withdrawing cash from their pension pots rather than buying an annuity to fund retirement – unless they expect to live well beyond 85, according to a new study.

Annuity rates are at an historic low and the forecast is for this to continue, according to Cass. If you die young the annuity dies with you and so you risk wasting your money by annuitising too early.

With careful management, pension pots of £100,000-plus should not run dry until at least the age of 80 or even older – and longer if you opt for flexible rather than fixed withdrawals, says the Cass Business School research.

It says that annuities often prove poor value and that savers should be able to make pension pots last, especially if they seek professional advice.

Dailymail.co.uk

Money makeover: Max Loosli, 60, needs a precision plan to spend his entire pension in his lifetime – without running out of cash first. New “pension freedoms” introduced this year mean that, for the first time, savers such as the Loosli’s are now able to access their pensions as cash, without paying punitive rates of tax.

Telegraph.co.uk

Many feared savers would blow their retirement savings when new freedom rules were introduced, with then pensions minister Steve Webb declaring he was relaxed about people blowing it on Lamborghinis should they so wish.
However, the ABI says retirees are taking a ‘common sense approach.’

Dailymail.co.uk

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