Annuity Rates, Annuities, Pensions, Divorce Free Fixed Term Quote
Home News Annuity Rates Annuities Pension Annuity Impaired Annuity Annuity Quotes Pensions Divorce Resources
   


21 April 2017 last updated

Drawdown demand likely to increase with rise in State pension age

Demand for flexi-access drawdown or fixed term plans is likely to increase if the State pension age is increased to age 70 as people retiring before this age make short term plans for their income.

There have been two reports published last month suggesting the current State pension age of 63 for women and 65 for men should be increased faster than expected and ministers will make a decision about the changes in May 2017.

A report from the former head of the CBI John Cridland points to a need to increase the State pension age to 68 and the report from the Government's Actuaries Department (GAD) to age 70.

Current plans are for the State pension age to rise to 66 in 2020 and reach age 67 between 2026 and 2028. Plans are for this to increase to age 68 from 2044 to 2046.

The Cridland Review recommends the State pension age should rise to 68 by 2039 seven years earlier and GAD expects this to rise further to age 70 between 2054 and 2056.

 
Drawdown to rise with higher State pension age
  Higher State pension age could see more demand for flexi-access drawdown and fixed term plans
  More annuity topics
  Quarter 2 News 2017
  News & articles
  Archive news stories
  Flexi-access drawdown
  Annuity rates tables
  Outlook for 2016
  Annuity rates charts
  15-year gilt yields
  Latest annuity rates
 

Pension freedoms allow more flexibility

Pension freedoms introduced in April 2015 allow people to use flexi-access drawdown or fixed term plans to take benefits from their pension rather than an annuity.

In 2013 annuity sales were in the region of 90,000 per quarter with a small percentage opting for drawdown and this figure decreased 75% to about 20,000 per quarter in 2015.

According to the CBI, in the last three quarters of 2015 following the changes £4.2 billion was invested in 63,600 drawdown plans compared to £3.3 billion in 61,700 annuities.

The traditional retirement age for most people is between 60 and 65 leaving many with a shortfall in income until they receive their State pension, which would boost other pension income they receive such as from a company pension scheme.

To match the inflation proofed £7,500 pa income from a State pension during this period using an annuity would require a fund in excess of £200,000 whereas the average fund size would be about £50,000.

For those with smaller additional funds saved such as in additional voluntary contributions (AVC), personal pensions, stakeholders or company money purchase schemes, buying an annuity would provide too little income and then would continue for their lifetime.

A flexi-access drawdown or fixed term plan on the other hand offers great flexibility and can pay the income you need for the time period until you your receive the State pension.

This will apply to more people at retirement in the future that find themselves retiring before they receive their State pension.

Rising cost of State pensions

The government spend about £100 billion a year on retirement benefits and with an aging population the number of people entitled to these benefits is increasing compared to those of working age.

To control costs the Cridland Review recommended scrapping the tripple-lock ensuring pensions rise by inflation, earnings or 2.5% whichever is the highest. As a result of the policy State pensions have increased by an extra £1,100 per year since 2010.

The Government's Actuaries Department was asked to consider two scenarios where someone spends either 32% or 33.3% of their projected adult life in retirement.

Under the 32% scenario the State pension age could rise to 69 between 2040 and 2042 whereas under the 33.3% scenario the age could rise to 69 between 2053 and 2055.

The Work and Pensions Committee research reveals in some deprived areas of the UK the increased age to receive the State pension is higher than the life expectancy for men and women.

The lowest life expectancy is in Parkhead West and Barrowfield area of Glasgow where men can expect to live to age 62.5 years and women to age 70.1 years.

In England the lowest male life expectancy is 67.5 years in central Blackpool and there are 26 areas where you will live less than 70.5 years. This compares to Westminster where males can expect to live for 92.9 years on average.

News related stories:
Flexi-access drawdown gain with 23% rise in UK equity markets
Drawdown popular as UK annuities fall up to 24% over the last year
Pension fund withdrawals high following new legislation, says FCA
Flexi-access drawdown will be used by 130,000 people says HMRC
Related internet links:
Gov.uk - Independent Review of the State Pension Age
BBC - State pension age could be higher than life span
 
Annuity Rates
  Age Single Joint  
  55 £4,216 £3,974  
  60 £4,702 £4,423  
  65 £5,453 £5,013  
  70 £6,105 £5,482  
£100,000 purchase, level rates, standard
Unisex rates and joint life basis
  Annuity Rates  
Annuity Quotes
  Plan your annuity and get quotes from the 12 leading providers  
 
  free annuity quote Free Annuity Quotes
  annuity quote no obligation No Obligation
  annuity quote all providers From All Providers
 
  Annuity Quote  
  Annuity Rates News:

Gilt yields lower due to North Korea
Latest annuity rates could fall Uncertainty over North Korea sends investors to gilt and bond safe havens
Retirement income up 21% since Brexit
Retirement income rise after Brexit vote Higher equity markets and gilt yields has seen income from pensions 21% higher
Pension freedoms help raise fund sizes
Pension freedoms help funds soar to £50,000 Pension fund sizes reach 50,000 with a little help from pension freedoms
Pension freedoms tax receipts at 1.5bn
Pension freedoms tax receipts are £1.5bn Pension freedoms have raised more tax for the HMRC than expected

  Follow Us:
You can follow the latest annuity updates on Twitter or as a fan on Facebook and Google+
  Facebook Page Twitter Page Twitter Page
Sharingpensions.co.uk   This website is for marketing purposes only and does not provide specific financial or legal advice. Website security issued by GeoTrust and Equifax. Copyright©2001-17 Sharingpensions.co.uk. All Rights Reserved