Retirement annuity rates in 'freefall' since Brexit vote, says expert
Retirement annuity rates have been in "freefall" since the vote to leave the EU, an expert has warned.
Annuity rates give people a guaranteed level of income when they retire - but Tom McPhail, head of retirement policy at Hargreaves Lansdown, said the rates on offer have been an "early casualty of the referendum result".
He said the result had sent annuity rates "into freefall", with 14 negative rate adjustments announced since the Brexit vote.
Falling rates mean that a 65-year-old with a pot worth £100,000 could now buy an annual income of £4,890.
But just six months ago, in January 2016, someone five years younger could get a better deal than a 65-year-old today, Mr McPhail said. A 60-year-old in January with £100,000 could have bought an income of £4,930.
Compared with eight years ago, the terms offered to today's 65-year-olds are 37% lower. In July 2008, a 65-year-old with £100,000 could have bought an income of £7,855.
Mr McPhail said: "Annuity rates are disappearing off the bottom of the chart. Just six months ago a 60-year-old could get a better deal than the terms now being offered to a 65-year-old.
"Even though rates are now at historic lows, there is no certainty whether or when rates will go back up again. It is also important to note that in recent years, anyone who decided to delay buying an annuity may well be worse off today.
"So if the question is, 'should I buy an annuity today?', then the answer is don't delay doing so just because today's rates are lower than in the past."
Mr McPhail continued: "For many investors a mix-and-match strategy, putting some of their pension into an annuity and some into drawdown, may well be the best approach. As always, anyone buying an annuity should shop around for the best possible deal for their circumstances. It's particularly important to provide health and lifestyle details to try and boost the income on offer."