Should I buy an annuity now rates top 7%?
Would YOU buy an annuity now deals top 7%? After years of scandals and low rates, many savers consider them worthless, risky and restrictive
- Rising interest rates mean that annuity providers can again offer better deals
- Research shows that many savers are doubtful or hesitant about this
- Pension freedom has led most savers to keep their money invested
Better deals: Higher interest rates mean people can buy more annuities for their money – see the latest industry average rates below
People over 50 remain skeptical about annuities despite a recent recovery in retirement income that they can buy you after years in the doldrums, new research shows.
One in five considers the products, which provide a guaranteed income until you die, to be worthless.
Some 44 percent of older adults surveyed believe annuities are inflexible, and 45 percent think they’re risky if you die earlier than expected, according to the Canada Life survey.
Annuities have been shunned for years because of poor rates and restrictive terms, and after they gained a bad reputation from misselling scandals.
The 2015 pension freedom reforms pushed most savers to keep their money invested and live on withdrawals instead.
However, recent interest rate hikes allow annuity providers to afford to finance much more attractive deals, leading to a resurgence in sales.
For £100,000, a healthy 65-year-old can now buy a retirement income of around £7,170 a year, with no inflation protection and a five-year guarantee – protecting your money immediately after purchase – a rate of almost 7.2 per cent.
For the same amount, the same person with a spouse three years younger could buy a joint annuity with inflation protection but no guarantee that would pay £4,720 a year, according to the latest industry averages from Hargreaves Lansdown (see below).
Source: Hargreaves Lansdown industry averages, June 29
Canada Life says there are “common misconceptions” about annuities, following a survey of nearly 1,000 over-50s in the spring.
The underwriter says annuity rates are at a nearly 14-year high after rising nearly 50 percent in the past 18 months.
And it adds that annuities can be flexible, with a “retirement account” version that lets you switch earnings on and off.
Canada Life says that if you’re concerned about losing the purchase amount due to an earlier-than-expected death, you can purchase a guarantee and value protection so that the income is paid out to your designated beneficiary.
The company says its research also reveals “a real lack of awareness and understanding beyond the misconceptions” because a significant number of people who said they were familiar with annuities were on the fence and disagreed or disagreed that they were a be good price or offer. flexibility.
The shake-up of retirement freedom eight years ago prompted most savers to keep their money invested, but this involves portfolio monitoring and exposure to the risks of the financial markets.
This is Money guides explore how to invest your retirement, retirement plans versus annuities, and how to combine retirement withdrawal with annuities.
The chart above assumes a purchase price of £100,000 annuity, a 10 year guarantee and no health or lifestyle factors
Retirement income director Nick Flynn says, “Annuities are sold rather than bought. This is reinforced by the misconceptions that have arisen about annuities as a product that has gone out of fashion.”
But he says they’re worth more than a cursory second look because of significantly improved rates and longer guaranteed periods that are effectively a money-back option.
