It was three years ago, in the March 2014 budget speech that George Osborne's declared "no one will have to buy an annuity”. Since then annuities have become more unpopular and sales have fallen by about 50%.
There was no mention of annuities and very little mention of pensions in the budget (probably because major changes were made in previous budgets) so no news was probably good news.
If inflationary pressures increase as result of better than expected economic growth and increase in prices because of the weak pound, long term interest rates could rise. This would cause annuity rates to rise and consequently new pensioners would get more income when converting their pension pots into lifetime income.
After a promising start to the year when long term yields increased, the upward trend has reversed and over the last few weeks’ annuity rates have fallen by between ½ and 1 %. The benchmark 15-year gilt yield rose to 1.93% in mid-February but has fallen back to about 1.6%. However, it will not take much to recover this lost ground.
There could be trouble ahead
Perhaps the biggest fear for pensioners is the risk of falling equity prices after Article 50 is triggered caused by uncertainty in the economy. This means that those drawing an income by way of which pension drawdown could see the value of their pension pots falling.
No matter if annuities go up or drawdown funds go down, everyone should take stock after the budget and plan for the year ahead.