One of the pension investment schemes set to see changes this year are annuities. With the downturn of the economic market and the subsequent drop in investment returns, more and more people are becoming savvier about their pension options.
If you’re thinking about annuities for your retirement speak to a company such as My Pension Expert for recommendations for your situation. In the US the rates and types of schemes available change, so it’s always best to speak to a professional for proper consultation.
As more people read about the poor turn out on some of the schemes that used to be profitable, they are left thinking: “Is this the right scheme for me?”
With this general lack of confidence in any company handling money, annuities companies will need to put a more personal and trustworthy face on their business.
This personal face will work well for businesses that are struggling to find employees with the qualifications they have previously required. They are able to keep up their man power while becoming a company which people can trust.
Another of the biggest changes to expect this year will be more transparency and easier to understand exit clauses. One of the main issues individuals have with annuities is that they are tied in for life. Annuities will need to have easier exit clauses so that if a scheme is not working for the retiree, they are able to easily switch to another one.
Annuities will be more personalised to someone’s situation and will become more flexible, so a person could change to a different type of annuity after a certain time period without being hit with any penalties.
Although it is easy to be discouraged as investments make less returns for the investors, the good news is that this public discontentment will force companies to adapt to meet and hopefully exceed our expectations.
My Pension Expert’s Scott Mullen said: “Annuities rates have fallen in the UK and the US in recent years due to the current economic climate. The banking crisis has led to record low interest rate on both sides of the Atlantic which is having a knock on effect on current annuity rates. This is because annuity providers use secure types of financial products such as corporate bonds and government bonds to provide the income for their annuity book as these types of investment are usually safe and low risk.
“When government and corporate bonds are introduced to the market they have to offer a competitive rate of interest to attract investment, but due to the lack of an attractive alternative form bank interest rates the yield offered have fallen proportionately. The economic crisis is having a harder impact on UK rates as the annuity rate offered for a 65 Year old male is 5.75% compared to 6.8% in the US. This could be as a result of UK qualitative easing which is putting additional downward pressure on UK government bond yields.”