Some funds will have been switched to cash or gilts in the years running up to the purchase of an annuity, although many will not and these will suffer the double whammy of a reduced pension pot and failing annuity rates.
With gilts yields at low levels these poor rates of return are understandable and explainable.
There is also the life expectancy factor which is providing a heavy drag on pension annuity rates. Recent data from the Office for National Statistics points to the onward march of life spans.
Those who are 20 years old today have twice the chance of living to 100 than their parents’ generation and three times the chance of their grandparents’ generation.
It is not the fact that the oldest person in the world reached 114, but how many more are living to ages approaching this. The Queen is certainly issuing more 100th birthday messages than 25 years ago.
In the investment world these factors have led to many annuity funds to look at equity release assets as an alternative to gilts or corporate bonds.
This will lead to greater availability of products that pensioners can use to access funds locked in their homes.