At the heart of the credit crunch many people saw their pension pots take a considerable fall in value. Many hoped that things would of gotten better and back to pre-crisis levels in order to retire in the lifestyle to which they have become accustomed. Unfortunately, we are seeing no such trend as the average income gained through a pension has actually fallen for the third year in a row in 2010 according to the latest report.
The Investment Life and Pensions by Moneyfacts suggest that due to increases in life expectancy and falling gilt yields one can expect that this drop in annuity rates could be here to stay.
They suggest that a man who reaches retirement age with a £10k pension pot can expect to receive an annual income of around £600 on average, while this figure is even lower for women. Annuity rates have certainly taken a hit with even best buy deal rates falling by as much as 5%. If you had taken out an annuity in the last two months of 2010 you may well of been luckier than others who signed up earlier in the year as annuity rates went slightly higher during this period. Even still, there is not much to write home about as 2010 was almost the year that had the steepest drops, had rates not rallied as the year came to a close.
It would seem that although there has been an increased emphasis by the government in growing one’s own private pension pot, annuity rates as this level will certainly not act as an incentive to save for one’s retirement.