Ros Altmann: Annuity rates set to worsen

15 February 2010

Retirees are going to have their pension incomes increasingly affected by low annuity rates, it has been claimed.

Independent pensions expert Dr Ros Altmann has said that the rates have been getting progressively worse over the last 20 years and the trend is set to continue.

The comment follows the publication of a Pensions Policy Institute (PPI) report, which estimates that trustees would need to start contributing 15 per cent of their salaries to a scheme in order to achieve a "desired level" of living during retirement.

However, Dr Altmann has described the claim as "misleading", saying that annuity rates will have a large affect on pension incomes.

"This kind of statement is, I fear, potentially misleading," she said.

"The reality is that it is not just important to know how much money is going into a pension fund, or even the value of that pension fund, because the vital factor is the pension income that comes out in retirement."

Fears that decreasing annuity rates could mean depleted pension incomes could lead to a surge in the number of people enquiring about equity release schemes.

Such policies allow homeowners to receive a financial boost taken from the value of their property assets.