Annuity rates up nearly a fifth in two years, after post-Brexit referendum crash

Published by Rachel Lacey on 17 September 2018.
Last updated on 17 September 2018

Coins growing in hand

The income 65-year olds can get from a £100,000 pension is up by 19% since rates bottomed out on 15th September 2016, just months after the UK voted to leave the EU.

Between the day before the EU referendum (23 June 2016) and the annuity rate nadir on 15 September 2016, the income available to a 65-year-old on a pot of £100,000 fell from £5,155 to £4,495, according to Hargreaves Lansdown.

The same pot today could buy an income of £5,431, a 19% increase.

Over the same period, Hargreaves Lansdown, says the UK stock market has risen by 17.49% and the average managed pension fund is up 15.34%.

Interest rates have also been increased by 0.5%, since the all-time-low of 0.25% set on 4 August 2016.

With Brexit just around the corner, and annuity rates looking much better than they did, Nathan Long, senior analyst at Hargreaves Lansdown says that using part of a pension to purchase some guaranteed income could be a good way to mitigate against market jitters.

He says: “There’s a lot of nervousness among investors, thanks to economic uncertainties, a 10-year stock market bull run which must come to an end one day, and of course Brexit anxiety.

“Pension investors may take the opportunity to de-risk ahead of potentially stormy waters by using a tranche of their pension to buy an annuity. The optimum annuity price point for most providers is around £40,000 to £60,000 which may appeal to those currently using income drawdown.”

How annuity rates have changed

This table shows the income a £100,000 pot can buy at various ages (single life, level annuity, income paid monthly).

Time Age 60 Age 65 Age 70 Age 75
Pre-referendum result 23/06/2016 £4,518 £5,155 £5,930 £7,072
Annuity rates bottom 15/09/2016 £3,856 £4,495 £5,262 £6,418
Current annuity rates 13/09/2018 £4,727 £5,341 £6,044 £7,066

Source: Hargreaves Lansdown

Any person considering an annuity should always shop around to make sure they get the best rate and declare any health problems or lifestyle factors such as smoking, which could make them eligible for an enhanced income.

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