Pandemic sparks annuities panic among retirees

Savers’ appetite for annuities appears to have increased sharply during the Covid-19 pandemic.

Financial advisers have been reporting that risk-averse clients are looking for guaranteed income from their pension funds, rather than accepting the uncertainties of income-drawdown schemes.

Annuities, which pay a guaranteed income for life in retirement, have fallen out of favour since the pension freedom reforms, with drawdown plans becoming much more popular. Many savers prefer the flexibility of drawdown arrangements, even though these carry more risk.

However, annuity providers have seen a three-fold increase in applications for certain types of annuity in recent months, with advisers suggesting that many clients have been spooked by the pandemic-related market volatility.

Such a response is understandable, but could prove costly. One market impact of Covid-19 has been a sharp rise in the price of gilts, regarded as a safe-haven asset by many investors; this has meant a corresponding fall in gilt yields, to which annuity rates are closely linked.

As a result, the average annual standard annuity income is now 5.3% lower than at the start of the year. Pension savers may be locking into rates at the worst possible time.

Recommended

April price hikes - these are the bills going up in April
Personal finance

April price hikes - these are the bills going up in April

Households will be hit with a series of bill increases from April - here’s what they are and how you can save money.
31 Mar 2023
Where will house prices go in 2023?
House prices

Where will house prices go in 2023?

We explore what could happen to house prices in 2023 as the market continues to slow down.
31 Mar 2023
Investors flock to NS&I savings after SVB scare
Savings

Investors flock to NS&I savings after SVB scare

Investors are increasingly pumping their cash into the safety-net of NS&I - lured by increased rates and the security of a government-backed savings a…
31 Mar 2023
Nationwide: UK house prices decline at the fastest pace since 2009
House prices

Nationwide: UK house prices decline at the fastest pace since 2009

UK house prices fell for the seventh month in a row in March, Nationwide’s house price index showed.
31 Mar 2023

Most Popular

Will energy prices go down in 2023?
Personal finance

Will energy prices go down in 2023?

Ofgem’s price cap is now predicted to fall to around £2,000, based on average typical use, for the first time since 2022. We have all the details.
31 Mar 2023
Best areas for buy-to-let in the UK
Buy to let

Best areas for buy-to-let in the UK

If you’re thinking of getting a buy-to-let property you’ll want to know the areas in the country with the highest rental yields
29 Mar 2023
The best one-year fixed savings accounts - March 2023
Savings

The best one-year fixed savings accounts - March 2023

Earn over 4% on one-year fixed savings accounts.
30 Mar 2023