A new survey from MGM Advantage has found independent financial advisers are predicting a fall in demand for conventional annuities.
90% of those IFAs questioned in the survey believe that falling annuity rates will lead to an increase in demand for alternative annuities compared to conventional annuities.
The MGM Advantage Annuity Index, which tracks the income paid on enhanced and on conventional annuities on a quarterly basis, shows that average conventional rates have fallen by 6.98% since June 2009.
In comparison, enhanced annuity rates fell by 5.32% over the same period of time.
It is important to consider all of the options for converting a pension fund into an income in retirement.
The majority of people reaching their selected retirement age continue to purchase a conventional annuity with the fund. In many cases, this annuity is purchased with the current pension provider.
For years now the retail financial services profession has been talking about the importance of shopping around to get the most competitive annuity rate, known as exercising your ‘open market option’. This remains very important, particularly with the big gap between the most and least competitive annuity rates.
What is just as important is ensuring that your selected retirement income option is tailored to your financial plans for retirement. Your decision about a retirement income option is a lasting one and can often not be changed in the future.
Whilst we expect to see conventional annuities remaining as one of the most popular retirement income options, we also expect to see much better consideration of all of the options before these important decisions are made.
Photo courtesy of samenstelling.
