The data compiled by Moneyfacts, found that based on a benchmark annuity (standard level without guarantee), the average annuity income for a 65-year-old has fallen by 14.8% on a £10K purchase price and by 15% on a £50K purchase price so far during 2016.
These figures easily surpass the previous highest annual annuity income fall of 11.5% recorded in 2012. Although there are more than three months of the year remaining, it is unlikely that the current economic environment will facilitate a strong enough recovery in annuity rates to avoid it picking up the unwanted tag of being the worst ever year for annuity rates.
Richard Eagling, Head of Pensions at Moneyfacts, said: “2016 has been a truly awful year for annuity rates, with rates falling to all-time lows. This is particularly disappointing as the stock market volatility that we are experiencing has re-emphasised the importance of a secure lifetime income for many retirees.
Unfortunately, record low gilt yields following the EU referendum result, the impact of Solvency II legislation and a significant weakening of competition in the annuity market have all exerted considerable downward pressure on annuity rates during 2016.”
