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The Difference Between The Best And Worst Pension Incomes Can Be Very Surprising

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Mixed outlook for annuities as both rises and falls recorded

Conventional annuities rates have climbed for both men and women over the past two months, while enhanced annuity rates have gone into decline over the same period, revealing a mixed outlook for the annuity market.

The latest figures from the MGM’s Advantage Annuity Index reveal that conventional annuity rates have increased by 0.2% for men, and higher 2.27% for women. In contrast, enhanced annuity rates have dropped by 2.6% for men, and a lower 2.45% for women.

The research also revealed a gulf between conventional and enhanced annuity rates. While a man with a £50,000 pension pot would average conventional annuity (per year) of £2,658, this would increase by 17.6% to £3,127 for an average enhanced annuity per year. The difference between these two annuity rates over the first five years of retirement would be £2,345, while the difference over the average retirement would be £7,973.

Similarly for women, a £50,000 pension pot would result in an average conventional annuity (per year) of £2,563, increasing to £2,982 per year (an increase of 16.4%) for an average enhanced annuity. The difference between these two annuity rates over the first five years of retirement would be £2,095, while the difference over the average retirement would be £8,380.

Aston Goodey, distribution and marketing director at MGM Advantage comments: "It is a real mixed bag for annuity rates with the gap between conventional and enhanced rates having shrunk to one of the smallest margins since we launched the index in 2009. These price changes have largely been driven by the recent small improvements in gilt yields and bond spreads pulling in. 

"The annuity rate market will continue to surprise over the coming weeks and months, as rates will change from tactical pricing moves as well as gender neutral pricing.”

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