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Freedoms hit some hard

Annuity incomes hit record low after pensions change

pension pot 2Average income from a standard annuity has plummeted to a record low, a consequence of the new pensions freedoms.

Single life annuity payouts fell by 5.7% over 2014, and that has accelerated to 6.4% this year, according to financial data firm Moneyfacts.

Experts are in little doubt that the fall in returns is directly attributable to the changes to pension rules on 6 April which gave retirees more choice over their pension pots.

Richard Eagling, head of pensions at Moneyfacts, said those for whom an annuity remains their main option have been hit hard by the change.

In January, a 65-year-old with a £50,000 pension pot would have received an average annual payout of £2,727 if they had bought a standard annuity at that time.

But the same person buying an annuity now would typically get a yearly payout of £2,550.

“In many cases, retirees looking for a secure income now face the unenviable position of annuitising at the lowest point in the product’s history,” said Mr Eagling.

“This is particularly unfortunate for those individuals who may have deferred making a choice until the introduction of the pension freedoms but have since decided that an annuity is still the most suitable product for them.”

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