AnnuityFeb 1 2018

Enhanced annuity income slashed since pension freedoms

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Enhanced annuity income slashed since pension freedoms

The fact that standard annuity rates edged up during 2017 while enhanced rates fell means that the uplift offered by an enhanced annuity is now greatly reduced, Moneyfacts reported.

During the fourth quarter of 2017 the average uplift fell from 16.7 per cent to 12.1 per cent, its lowest level since January 2013, when enhanced annuity providers adopted ultra-cautious pricing following the switch to gender neutral rates.

Tom McPhail, head of retirement policy at Hargreaves Lansdown, said the average uplift for the enhanced quotes his firm got in 2017 was closer to 17 per cent, down from 26.92 per cent in April 2015.

The firm's own data also showed standard annuity rates to be down by 2.5 per cent and enhanced rates by 1.4 per cent when comparing April 2015 to January 2018, he said.

Mr McPhail said: "We know customers often overlook the death benefits available now on annuities. One very popular aspect of the pension freedoms has been the death benefits and it would make sense that people in poorer health are choosing drawdown instead of an annuity."