The answer to this will be different for everyone and it will depend upon each individual’s circumstance, but it may be the right time to consider this if your Pension is in drawdown. A Pension annuity provides an income for life and is taxed as income. As the market in the last few years has been volatile and if you are taking income from drawdown it may have been concerning you, even causing sleepless nights. If this is the case it may be worth getting an annuity quote, even if only to confirm this is not the right course of action for you.
An annuity based on a level, single life annuity for a 65 year with a purchase price of £100,000 is up a record 47% or £2,400.00 during 2022 reaching a 14 year high. This is due to the central bank base rate rises and the mini budget uncertainty. Based on the same example in Feb 2008 £100,000 bought you an income of nearly £8,000pa, in Aug 2016 it reached an all time low of less than £5,000pa. In June this year it had gone up to just under £6000pa and in October it had gone up to over £7,000pa*.
Obviously no one knows how long the uncertainty or higher interest rates will last, so we don’t know how long annuity rates are going to remain as attractive as they are now, they may even improve further as providers may not have factored all the points in. The above is also based on a level Pension with no guarantees. I would always recommend that you look at all the options available to you including guarantees.
With a guarantee, the annuity will pay out whether you are dead or alive for a predetermined time (usually either 5 or 10 years), but continues afterwards if you are still living. Often when we have quoted there is very little difference in the amount when we have included a 5 or 10 year guarantee and including this can be beneficial.
If you would like to see what annuity rates are available for you please pick up the phone today. We would always recommend that advice is sought for this as once you have bought an annuity you will not be able to change it.
*Sharing Pension 31st October 2022 based on annuity rates on the 15th October 2022
The content included on this page is based on our understanding of the UK tax law at the time of publication. It may be subject to change and may not be applicable.
