LV= and Just Retirement have each launched one-year fixed-term annuities in response to the recent post-Budget shakeup to the pensions system. The reforms, which come into force in April 2015, will mean that anyone aged 55 or over will be able to take their entire pension pot as cash if they wish to do so, rather than having to buy an annuity.
Bridging the gap
The new products launched by LV= and Just Retirement consist of one-year fixed-term annuities, and are designed for people at the brink of retirement who want to defer making a long-lasting decision about how they will take their pension income in retirement until new rules come into effect next year.
Timing an annuity purchase can be a difficult decision – buy now and you could risk missing out on rising rates; delay and you could end up with a worse rate in the future. There seem to be mixed signals in the annuities world at the moment, leaving many older people with a dilemma – should they buy now or wait and see what happens?
There are encouraging signs that annuity rates are starting to rise – a welcome development for older people who have saved for years for their retirement.
Annuities are purchased in order to turn pension savings into annual retirement income – and they hit a record low point last summer. However, several of the major annuity providers have increased their offers in recent times. Annuity rates tend to move up or down in line with the interest paid by the Government on the bonds it sells to investors. This interest rate is called the gilt yield, and annuity rates reflect the yield on certain types of gilts.