Latest analysis by Standard Life revealed annuity rates have increased by 50% since the start of the year – rising from 4.66% to 7.04% by the second week of October for a healthy 65-year-old[i].
The follows other findings from Just Group which showed a 16% gap in income between the worst and best paying Guaranteed Income for Life plans[ii].
Comparisons showed the worst-paying plan would generate £3,137 income a year on a £50,000 purchase price for a 65-year-old in good health, with the best, generating £3,642. This is £505 a year extra income, or £12,625 over 25 years.
In response, Steve Butler, CEO, Punter Southall Aspire, urges people close to retirement to always shop around to get the best annuity as it can make a big difference to retirement income.
Steve says: “There is a huge disparity between annuities which is very apparent now rates have increased. Those close to retirement need to ensure they are getting the best deal for their circumstances and have a clear understanding of the wide range of options there are in the annuity market.
“This means shopping around and not just opting for the annuity your pension provider is offering. As this analysis shows, the difference between the best and worst paying plans is significant and it’s likely to increase if rates continue rising. With people grappling with the cost of living crisis, it’s never been more vital to make best retirement decisions.
“Employers can also play a key role in supporting staff by providing tailored financial education and tools for those approaching retirement, and employees increasingly look to their employer for support for the next stage of their lives. Offering this support could help someone increase their retirement income significantly as they head into retirement.”
Punter Southall Aspire research found 61% of employers don’t provide any pre-retirement or financial guidance to employees approaching the age when they can access their pension pots (55-plus) – leaving many in the dark when it comes to planning their financial future[iii].
This is despite eight out of ten employers saying their company and people would benefit from being better informed about all things financial; and retirement planning topping the list of what employers think would be most valuable.
Punter Southall Aspire offers employers tools to support employee financial wellbeing including Aspire to Retire, an online solution employees can use to plan and visualise their all their savings in one place and Pension Potential, which compares every annuity on the market. Free to employers and free to use, it gives employees the help they need, online and with the option to talk in the phone or in-person. For more information, click here.