75% fall in annuity income in 15 years

A PENSIONER retiring today would receive just a quarter of the annuity i ncome of a worker retiring 15 years ago, research has shown.

Even compared to last year, buying one of the policies would net nearly a tenth less annually now than in 2014.

Financial website Moneyfacts blamed the drop on an ageing population leading to lower yearly payouts and market conditions, such as rock-bottom interest rates and lower investment returns.

Last night, experts warned that the days of generous annuity returns were ‘gone forever’ and said older workers should not expect the retirement incomes of 15 years ago.

Moneyfacts f ound that a worker who had paid £100 a month into an average personal pension fund for 20 years and then bought an annuity today would receive an annual income of just £2,109 or £175 a month.

That is an incredible 72.7 per cent lower than an equivalent annuity bought in September 2000 when a retiree in the same position received £7,748 a year or £646 a month. Buying an annuity i n September 2014 would bring in £2,292 annually – £183 a year more or £15.25 per month than this year.

The figures take into account the fluctuating value of pension pots due to changing market conditions since the 1980s.

It means a worker putting £100 a month into a pension fund throughout the 1980s and 1990s before retiring in 2000 would have a pot worth £89,366.

An e quivalent f und f or someone who paid the same amount for 20 years to 2015 would be worth less than half at just £42,440. In 2014, the figure was £44,089.

richard Egan, pensions editor at Moneyfacts, said: ‘ The days of 15 years ago have gone forever. The economic climate has worked massively against retirees. Dreams of a comfortable retirement could be shattered.’

remedies include making up the shortfall by paying in more or delaying retirement, he added.

Alan Higham, of Pensionschamp.com, said new rules mean pensioners can wait until rates improve before deciding to buy an annuity.

Tom McPhail, of Hargreaves Lansdown, advised retirees to shop around if buying an annuity as well as having money in other investments.