Since the financial crash of 2008, annuity rates have been what can only charitably be described as low. This climate, combined with the complications and lack of clarity involved in buying an annuity, has locked tens of thousands of pensioners into struggling on a far lower retirement income than they need to.
What’s wrong with annuities?
There’s nothing inherently wrong with annuities. And for most people, particularly with smaller pots, they remain the best option. The problem is twofold.
Firstly, rates have become incredibly low in the current economic climate. This is predominantly due to yields on gilts (government bonds) being low. By and large, insurance companies provide lifetime annuities by sticking your pension pot into bonds – and gilts in particular – for a modest but near-guaranteed return. If yields are low, so are annuities. Continue reading