Gilt yields at their lowest rate for 300 years spells retirement misery for thousand and it could get worse, says My Pension Expert

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New retirees face the biggest dilemma. Do they retire now with annuity rates at record lowest levels or wait and risk further decreases?

My Pension Expert
Annuity rates have been on a downward spiral and the question is just how low can they go?

Gilts are the main investment behind annuity rates so it is no surprise that annuity rates are so low given the fact that GILT yields are the lowest they have ever been since records began in 1703.

The most recent MGM Advantage Index indicates the largest quarterly drop in annuity rates since its inception in August 2009. In the past three months, average annuity rates have decreased by 7 percent. Further, the Index reveals a 20 per cent fall in annuity rates in the three years between August 2009 and September 2012.

MGM Advantage’s Aston Goodey claims that record low gilt yields mean that annuity rates are simply free falling. But for a drastic increase in yields, rates are predicted to decrease even further in the coming months.

According to the research, the disparity in retirement income between bottom standard annuity rates (for those aged over 65 with a £50,000 pension fund) and the top enhanced annuity rates (obtainable by those possessing health risks, such as a high blood pressure) is 48 per cent for females and 44 per cent for males.

Scott Mullen of My Pension Expert the annuity specialists said “Annuity rates have been on a downward spiral and the question is just how low can they go? With a typical annuity rate for a 65 year old male paying less than 6% the answer you would expect is, not much further but that couldn’t be further from reality as the EU gender equality directive takes effect on the 21st of December this year. This will see potential decreases of between 2-4% for male rates with HMRC predicting a 13% drop.”
People considering retirement should take financial advice because there are alternative that could offer the perfect answer for some investors.

My Pension Expert is a company of Diploma Qualified Independent Financial Advisors who specialise in the at retirement market.

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Jonathan Shaw
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