The average annuity rate on a £50,000 pension pot over a 20 year retirement period will pay £14,180 less income today compared to three years ago MGM Advantage has calculated.

Historic low returns on UK gilts, gender neutral pricing and longevity risk have all hit annuity rates hard with the average rate falling by 2.5 per cent in Q4 2012, by 11.7 per cent in the last year and 21.6 per cent since August 2009.

In January 2010, the average annuity for a 65-year old with a £50,000 pension pot would have had an annual income of £3,495 compared to today’s value of £2,786.

MGM Advantage distribution and marketing director Aston Goodey commented: “Improving longevity and Solvency II will continue to apply pressure on rates, and we expect a further period of uncertainty as the dust settles on the introduction of gender neutral prices.

“For people willing to accept some risk, alternatives include investment-linked annuities, which offer starting incomes to match the best conventional rate.”

Share Story: