Standard†annuity†rates have collapsed to all-time lows just weeks after new pension freedoms came into force, according to a financial website.
The average annual income on offer from a standard†annuity†for a 65-year-old with a £10,000 pension pot has plunged by 5.9% since the start of the year and for someone with a £50,000 pension pot it has fallen even more sharply, by 6.4%, research from Moneyfacts finds.
In January this year, for example, a 65-year-old with a £10,000 pot could have received £506 a year . Now, they would get a payment of just £476 a year on average.
Meanwhile someone with a £50,000 pension pot would have received an average annual payout of £2,727 if they had bought a standard†annuity†in January. But the same person buying an†annuity†now would typically get a yearly payout of £177 less, at £2,550.
Moneyfacts, which looked back to when the modern†annuity†market started around 30 years ago, says the latest rate falls mean that the average standard†annuity†pension income has reached its lowest ever level.
It comes just weeks after the launch of new freedoms for the 320,000 people retiring every year with a defined contribution (DC) pension. See MoneySavingExpert.com creator Martin Lewis' five minute Pension Freedom briefing for more on this.
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The changes mean pension savers are no longer required to buy an†annuity, which gives a guaranteed retirement income, although some people will still want to in order to help ensure that they do not out-live their savings.
People can now take money out of their pots as they wish, subject to their marginal rate of income tax.