Money Matters

The shock waves from the annuity bombshell announced in this year’s Budget are still reverberating across the industry. Sales of annuities have fallen by as much as 50% in some places. Providers and distributors are busy planning how they can replace this business. The option, from April 6 next year, for individuals to take cash form their money purchase pension pot has meant that many are simply and wisely, deferring any decision until then. As ever in times of change, best to wait until the dust has settled and the proposals become reality. The small matter of interest rates potentially rising in between shouldn’t be over looked either. I don’t think this is the end of the lifetime annuity, rather it will move with the times, become more relevant. After all it delivers exactly what it says on the tin – a guaranteed income for life resulting in security and peace of mind. Basically it is the only sure fire way to transfer longevity risk and AB39 is a healthy post code. Don’t write them off, there could be a popular resurgence. They are relatively simple, easy to understand and after all, most individuals when they reach retirement age tend to value security very highly so when the market settles and consumers look at the alternatives, the tax implications and the risk of running out of money, there is no reason why sales of annuities should not increase again.

Annuities are not the perfect retirement vehicle for everyone but for the mainstream majority who values security above flexibility they remain the obvious choice. One last point - do not arrange your annuity via the internet. The best rates and broadest choice are available only by taking face to face advice.