Sound Financial Group Blog

More Quantitative Easing is another kick in the teeth for those at retirement wishing to secure their pensions. However there are solutions, some little known, some more adventurous…

So we have seen another round of QE, whereby the Bank of England pumps more money into the system (this time £50bn) to purchase gilts, which in turn pushes up the price of gilts and depresses the yield. Ultimately this means that lower yields equal lower incomes for those about to purchase an annuity with their pension funds. The applicable gilt yield for February is 2.25% and this could now fall further. Ouch.

Furthermore more money in the system could mean higher rates of inflation to come and this can devalue incomes whereby annuitants have purchased a ‘level’ i.e. non-escalating pension.

So what can be done if you are now considering taking your pension via the relative safety of an annuity purchase?  Well if the rates are unattractive there are alternatives;

Income Drawdown - flexible withdrawals are allowed from zero, but there are risks.

Flexible Annuities – A combination of traditional and investment linked annuities with added flexibility.

Phased Retirement – The use of traditional annuities combined with the tax-free cash element. 

Scheme Pension – A form of drawdown with added benefits including certain guarantees and health based increments.

Those who are about to purchase an annuity could benefit from increases in income based upon their health, lifestyle and post code, so shopping around for unconventional annuities is recommended.

Annuity rates are soon to be made ‘unisex’ and therefore this will be another blow for male annuitants as female rates are lower due to their longer life expectancy. So the best plan for those about to buy an annuity could be to move to the east end of Glasgow, start smoking and if you are a man, have a sex change!

Alternatively speak with us and let us outline your best options. Initial meetings are without cost or obligation.