Pension annuity rates are predicted to fall by 20-30%, due to new European pensions legislation coming in 2012.
For pensioners who have not yet purchased an annuity, or have an income drawdown arrangement with their pension still invested in the stock market, or those retiring in the next 2 years, the consequences of this announcement are clear.
Consulting a financial adviser to look urgently at purchasing a pensions annuity, before rates undergo this radical fall, is essential.
The fall in rates will be a by-product of the Brussels initiative ‘Solvency II’, which aims to reduce risk for large pensions companies like Prudential and Aviva, by requiring them to hold back more capital in their reserves, specifically to meet their annuity pay-out liabilities.
This requirement to hold back more capital will mean reduced payments to annuity holders, sparking the fall in annuity rates.
