Annuity rates have tanked by 14% so far this year, with a £100,000 pension pot now buying a 65-year-old £4,654, £759 less than at the start of the year, according to research. Rate changes have been even more pronounced for younger retirees.
A 60-year-old with a £100,000 pension who bought an annuity at the start of the year would have received an income of £4,776 but the same person retiring today would get just £4,051, a 15% decrease. Over the course of a 20-year retirement, that’s a difference of £14,500 (Annuity). Fears of a no-deal Brexit and a slowdown in the global economy have increased the cost of buying the secure investments that insurers use to underpin annuity pay-outs. It’s currently making keeping your pension invested look more attractive than it probably should do.
Brexit recession fears ease
Fears of a UK recession eased on Monday as new data showed better than expected economic growth in July. The UK economy grew by 0.3% between June and July, according to the Office of National Statistics (ONS). Economists had forecast month-on-month growth of 0.1%, up from 0% in June. Barring a serious relapse in August and September, this suggests that the UK should avoid falling into a technical recession in the third quarter. A recession is defined as two consecutive quarters of recession. The UK economy shrank by 0.2% in the second quarter of the year and July marks the start of the third quarter. The uptick in growth in July was driven entirely by the service sector, which covers everything from hospitality to banking and is the biggest part of the UK economy. While the figures are from from stellar, after a contraction in the second quarter the chances that we see a negative GDP print in the third have now dropped significantly, meaning that a technical recession will likely be avoided.
Half of adults still rely on parents
Almost half of adults have said that they still rely on their parents for financial support, according to a new study. Over the last year, adults have borrowed a total of £708 from their parents to assist in the costs of university fees, bills and home improvements, with some admitting to using the cash to fund coffee pods, contact lenses, mobile phone bills and dog food. Out of the 2000 adults polled, three in five said that they would struggle to cope without financial support from their parents. The research was commissioned by Virgin Media to mark the launch of its new Family Plan offering. The research shows that ‘The Bank of Mum and Dad’ is still very much in business, with Brits depending on their parents even when they’re grown-up.
What would an election mean for your finances?
Most people are bored with Brexit but must watch what’s happening because they are concerned about their finances. The big question as the political infighting unwinds at Westminster, almost changing by the hour, is what does the possibility of a General Election mean? That you should diversify your assets most commentators agree. Gold is one area that a fund manager might look at. You should stay invested because if Brexit is resolved, assets can rise. What about Sterling? Now it’s £1.19 or £1.20 against the US dollar. Some experts believe it’s advisable to stick with Sterling, but it’s an opinion and lots of things could happen and your adviser may take a different view. Some think we are close to the bottom and the bad news is already priced in. If we are close to a low, assuming we get some certainty, then we are likely to see a rise in Sterling. It won’t be massive because we have some pain to go through before we see a recovery, so most don’t think the price is going to shoot back up. If the politicians make the right decisions, Sterling will go back up, but I suspect £1.30 or £1.35 to the dollar in the future is probably as high as the price will go.
Financial Advice Including Pension Advice, Bristol
If you would like to speak with one of our Independent Financial Advisors and potentially receive financial advice, please contact us on 0117 923 7652. We are based in Clifton, Bristol but we are happy to service clients from across the UK and we provide free initial meetings at our client’s convenience.
Churchill Wealth Management Limited is located at 13 Alma Vale Rd, Bristol BS8 2HL, United Kingdom.
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