Annuity purchase should be considered before ‘Brexit jitters’

Written by Theo Andrew
17/09/18

Pension investors should consider purchasing a partial annuity while rates are strong and ahead of any “Brexit jitters”, it has been suggested.

According to Hargreaves Lansdown, annuity rates have recovered by 19 per cent since they hit rock bottom in September 2016, but economic uncertainties and the current 10-year stock market bull run means there’s “a lot of nervousness among investors”.

Currently, a 65-year-old with a £100,000 pension pot would receive £5,341 a year, compared to £4,495 per annum when rates were at their lowest.

Hargreaves Lansdown senior analyst, Nathan Long, said: “Annuity rates suffered a huge drop in the immediate aftermath of the referendum result as the yield on gilts tumbled. Now is a great time to look at annuities again as rates have risen 19 per cent since bottoming out two years ago, and the average managed pension fund has grown 15 per cent.”

The number of annuity providers has fallen to six as the number of people purchasing has dropped significantly, however Long suggests that you should still shop around.

He added: “Pension investors may take the opportunity to de-risk ahead of potentially stormy waters by using a tranche of their pension to buy an annuity. The optimum annuity price point for most providers is around £40,000 to £60,000 which may appeal to those currently using income drawdown.”

Furthermore, the average manage pension fund has enjoyed returns of 24 per cent since the referendum result, and 15 per cent since annuity rates were at their lowest.

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