Annuity rates are back up to pre-Brexit referendum levels, it has been reported.
Since the beginning of May, 10 rate increases have been recorded, now bringing annuity rates back up to post-Brexit referendum levels.
Annuity rates diminished during September 2016 following the EU referendum. However, currently a £100,000 pension pot can lead to a level income of £5,200 for a 65 year old, contrasting to £5,155 directly before the Brexit referendum, Hargreaves Lansdown has found.
Despite this, looking around for the best annuity rates remains to be imperative due to the fact that over six in 10 annuities are uplifted as a result of health or lifestyle.
Hargreaves Lansdown senior pension analyst Nathan Long, commented: “The referendum result saw annuity rates drop on the back of a fall in the bond yields used by insurance companies to back their annuity contracts. Other factors play a part in annuity rates, such as life expectancy and annuity providers’ appetite for new business, but the bond yields are the key determinant.”
He continued to state how annuity sales remain lower following the pension freedoms. Long explains this is because of the ability under income drawdown to pass on accrued pensions on death and the fact that many retirees perceive annuities as offering poor value as they still anchor to higher historic bank rates.
Long concluded: “There remains demand for guaranteed income, with FCA data showing more people purchase an annuity than opt for income drawdown after the age of 65.”