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| Annuities take a hit as rates fall following Brexit | Annuities take a hit as rates fall following Brexit |
| (2 months later) | |
| The first direct hit on pensions from Brexit came on Monday morning, as pension companies began to cut the amount they will pay people who are newly retiring. | The first direct hit on pensions from Brexit came on Monday morning, as pension companies began to cut the amount they will pay people who are newly retiring. |
| Just Retirement and Retirement Advantage have both announced cuts to their annuity rates, and experts said more were likely to follow. Just Retirement’s rates are down by around 2%. | Just Retirement and Retirement Advantage have both announced cuts to their annuity rates, and experts said more were likely to follow. Just Retirement’s rates are down by around 2%. |
| An annuity is a product available for retirees and offers an income for life, bought at retirement with all or part of a person’s pension savings. | An annuity is a product available for retirees and offers an income for life, bought at retirement with all or part of a person’s pension savings. |
| The returns available reflect movements in interest rates, and since Brexit the money markets have signalled lower long-term rates. | The returns available reflect movements in interest rates, and since Brexit the money markets have signalled lower long-term rates. |
| Tom McPhail of financial advisers Hargreaves Lansdown said: “Gilt yields and annuity rates have been dropping steadily over the past year. The events of the past couple of days have given new momentum to that trend. | Tom McPhail of financial advisers Hargreaves Lansdown said: “Gilt yields and annuity rates have been dropping steadily over the past year. The events of the past couple of days have given new momentum to that trend. |
| “For any investor planning to buy an annuity in the immediate future, it may make sense to do so sooner rather than later. Once you’ve obtained a quote from an annuity company the terms are usually guaranteed for between two and four weeks.” | “For any investor planning to buy an annuity in the immediate future, it may make sense to do so sooner rather than later. Once you’ve obtained a quote from an annuity company the terms are usually guaranteed for between two and four weeks.” |
| McPhail said those who wanted an annuity should shop around for the most competitive terms. He added: “If you want to delay purchasing an annuity, but need to draw on your pension savings, then look at drawing an income from your funds using a drawdown arrangement instead.” | McPhail said those who wanted an annuity should shop around for the most competitive terms. He added: “If you want to delay purchasing an annuity, but need to draw on your pension savings, then look at drawing an income from your funds using a drawdown arrangement instead.” |
| But the flipside of falling annuity rates is likely to be lower interest rates on mortgages. Moneyfacts, which compiles a daily moving index of the average two-year fixed-rate deal, said rates fell marginally on Friday. | But the flipside of falling annuity rates is likely to be lower interest rates on mortgages. Moneyfacts, which compiles a daily moving index of the average two-year fixed-rate deal, said rates fell marginally on Friday. |
| Mortgage experts such as Ray Boulger of John Charcol have already suggested that longer-term fixed-rate deals will emerge in the coming days priced at lower levels than last week, reflecting falls in gilt yields. | Mortgage experts such as Ray Boulger of John Charcol have already suggested that longer-term fixed-rate deals will emerge in the coming days priced at lower levels than last week, reflecting falls in gilt yields. |