Rising interest rates are changing retirement income perspectives.
Three years ago was another era when it comes to interest rates. The Bank of England’s Bank Rate was just 0.1% in December 2020 when a government bond maturing in 2035 delivered a gilt-edged annual return of less than 0.4%. Today’s 15-year gilt offers around 5%.
While the change in bank rate received plenty of media coverage, the move in long-term government bond yields has attracted much less attention. Those higher bond yields have pushed up annuity rates significantly across the board. For example, in December 2020, a typical non-smoking 65-year-old (man or woman) could have secured a 4.8% guaranteed income for life by purchasing an annuity. In October 2023, the equivalent 65-year-old buying an annuity would receive a rate of around 7.5%.
Choosing the right option
If you are about to start taking an income from your pension fund or are considering a move away from income withdrawals, look carefully at what today’s annuity market can offer you. Annuity tables are at best only a very broad guide for a variety of reasons:
- Annuity rates are now close to being individually calculated. Where you live, whether you smoke, how much you drink, any medical conditions you have and your relationship status are all factors that can determine your personal annuity rate.
- Annuities can be set up as level or increasing, either at a pre-determined rate or in line with inflation.
- Joint life annuities are an option, meaning that a guaranteed income is paid for both your and your partner’s lifetimes, or the second person could be a dependent child.
To learn more about all your annuity choices and the latest rates, get in touch.
To arrange an appointment to discuss you can contact us via your usual MHA adviser, or directly on 01604 621 421, or email the team on email@example.com
General risk warnings & other important information
This is a marketing communication, for general information only, and is not intended to be individual investment advice, a recommendation, tax, or legal advice. The views expressed in this article are those of MHA Caves Wealth or its staff and should not be considered as advice or a recommendation to buy, sell or hold a particular investment or product. In particular, the information provided will not address your personal circumstances, objectives, and attitude towards risk. Therefore, you are recommended to seek professional regulated advice before taking any action.
Key Risks: Capital at risk. Past performance is not a guide to future performance. The value of an investment and the income generated from it can go down as well as up, and is not guaranteed, therefore you may not get back the amount originally invested. Investment markets and conditions can change rapidly. Investments should always be considered long term.
This Information represents our understanding of current law and HM Revenue & Customs practice as at June 2023. Tax assumptions and reliefs depend upon an investor’s particular circumstances and may change if those circumstances or the law change.
Tax and Estate Planning Services (including Trusts) are not regulated by the Financial Conduct Authority.
The Financial Conduct Authority does not regulate tax advice. Tax treatment varies according to individual circumstances and is subject to change.
The value of your investment and the income from it can go down as well as up and you may not get back the full amount you invested.
Past performance is not a reliable indicator of future performance.
Investing in shares should be regarded as a long-term investment and should fit with your overall attitude to risk and financial circumstances.
Occupational pension schemes are regulated by The Pensions Regulator.