Annuity rates 'in freefall' since EU vote

Older people will receive lower pensions, as a result of falling annuity rates

Annuity rates - which determine the value of pension incomes - have been 'in freefall' since the UK's vote to leave the EU, according to an expert.

Rates have fallen by 3.5% in the two weeks since 24 June, said Tom McPhail, head of retirement policy at Hargreaves Lansdown.

Before the vote, a 65 year-old with savings of £100,000 would have been able to buy an annual income of £5,069.

Now the value of that pension has dropped to £4,890, a new record low.

Experts had predicted just such a development before the referendum, yet a majority of people over the age of 60 voted to leave the European Union.

'Don't delay'

"Annuity rates are disappearing off the bottom of the chart," said Mr McPhail.

"Just 6 months ago a 60 year old could get a better deal than the terms now being offered to a 65 year old. Even though rates are now at historic lows, there is no certainty whether or when rates will go back up again."

Annuity rates have been falling for many years, as life expectancy increases.

However the drop has been exacerbated by falling bond yields in the two weeks since the vote.

Nevertheless, Mr McPhail advised anyone thinking about buying an annuity not to wait for any upturn in rates.

"So if the question is, 'should I buy an annuity today?', then the answer is don't delay doing so just because today's rates are lower than in the past."