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Gilts dragging down pensions more than expected

Gilts dragging down pensions more than expected

Annuity prices have fallen once again. As much as we would love to inform you that your retirement is safe, if you have not diverted a minimum cash outlay each month for your retirement then the future could possibly be unclear.

Annuities are just what you purchase when you reach retirement age in the UK in return for an earnings that will sustain your with your twilight years. This works well if the annuity rate is high but exactly what if it falls as it has done this month to 2.09 %?

With the stock exchange volatility an ever present hazard since early 2008, no matter which country you live in, knowing exactly what you may actually get for your retirement has actually become far less clear than it used to be.

According to the FT [snippets below] this month yields on 15 year gilts fell to 2.02 per cent compared with just 2.75 per cent just 4 months ago. This is having a dramatic result on pensions and the indicators are that the trend of falling annuity rates will certainly be here for some time yet. We reported earlier in August about the “pension meltdown”.

Of course we do not expect annuity rates to fall forever, as there is only so much these can fall. They will no doubt increase in the future, however for those nearing retirement now things are most likely to get even worse prior to they improve – it really is time to start looking at retirement, especially if you fit into the late 30′s to late 40′s.

News Snippets for your reading

Daily Mail
Make ‘past their sell-by date’ pensions less frightening urges Saga boss
[ read - http://bit.ly/Rsk2v1 ]

Daily Mail
One in 10 plan to work until they drop dead as government struggles to battle pensions crisis
[ read http://bit.ly/P02erD ]

FT 
Bank of England holds base rate at 0.5%
[read http://bit.ly/SngalS ]

FT
Men’s annuity rates to ‘tumble’
[ read http://bit.ly/OOzqn8]

Daily Mail  
Bank of England’s money printing blamed for pensions ‘meltdown’ as annuity payouts dive 27%
[read http://bit.ly/M61PCr ]

Related:
Pension Meltdown (August 2012 archive)
Organise a no cost pension review
Assets International News