Brexit sends annuites "into free-fall" as rates drop 3.59%

In the past two weeks, the best open market rate for a 65 year old has fallen by 3.59%, with a standard terms annuity now offering an income of £4,890 on a fund of £100,000.

In total, 14 negative rate adjustments have been announced already since the Brexit result.

Just 6 months ago, someone 5 years younger could get a better deal than a 65 year old today; a 60 year old in January with £100,000 could have bought an income of £4,930. This means they would potentially receive 5 years’ of extra income paid at the same rate as a 65 year old would get today.

Compared to rates of 8 years ago, the terms offered to today’s cohort of 65 year olds are 37% lower: in July 2008 a 65 year old with £100,000 could buy an income of £7,855, today it is just £4,890.

Tom McPhail, Head of Retirement Policy, Hargreaves Lansdown, said: “Annuity rates are disappearing off the bottom of the chart. Even though rates are now at historic lows, there is no certainty whether or when rates will go back up again. It is also important to note that in recent years, anyone who decided to delay buying an annuity may well be worse off today.

“So if the question is, ‘should I buy an annuity today?’, then the answer is don’t delay doing so just because today’s rates are lower than in the past.

“For many investors a mix and match strategy, putting some of their pension into an annuity and some into drawdown, may well be the best approach. As always, anyone buying an annuity should shop around for the best possible deal for their circumstances. It’s particularly important to provide health and lifestyle details to try and boost the income on offer.”