The average annual income from a standard annuity fell by 5.7% in 2014, and by a further 5.9% since the start of 2015 for a 65-year-old with a pension pot of £10,000. For those with a £50,000 pension pot the decline this year is even sharper, at 6.4%, according to financial data firm Moneyfacts.
This puts the average standard annuity pension income now at its lowest ever level, surpassing the previous all-time lows recorded in November 2012 just prior to the introduction of gender neutral pricing in December 2012.
While enhanced annuities have proved slightly more resilient, joint life annuity rates have been cut even more severely since the beginning of the year than their single life counterparts.
Richard Eagling, head of pensions at Moneyfacts, said in many cases, retirees looking for a secure income now faced the unenviable position of annuitising at the lowest point in the product’s history.
“This is particularly unfortunate for those individuals who may have deferred making a choice until the introduction of the pension freedoms but have since decided that an annuity is still the most suitable product for them.
“Could we be about to see a wave of new annuity business hitting the market at a time of record low rates in the same way that many individuals rushed to annuities before the introduction of gender neutral pricing, only to unwittingly fix their incomes in at the previous all-time lows?”
He added that the one saving grace for retirees is the enhanced annuity market where rates have been more resilient and have yet to fall to an-all time low.
