The pension fund needed by a 65 year-old man to purchase an annuity paying out £5000 per year has increased by 29% over the last three years according to a report from the Office for National Statistics.
The Pension Trends report suggests that a 65 year-old man now needs a pension pot of £152,800 in order to purchase an income of £5000 per year, compared to £118,000 required to buy the same size income in 2009.
New rules set down by the EU Gender Directive may be partly responsible for the rise for men, but there are other factors involved too. As of December 2012 annuity providers are no longer able to offer differing rates on the basis of gender. Previously, males enjoyed generally higher annuity rates than their female counterparts on the basis of typically having shorter lifespans because of their sex.
However, pension incomes have been falling for some time now and the ONS report also suggest that the amount needed by a 65 year-old woman to generate a £5000 per year income has risen by 14% between 2009 and 2013 too.
Following the introduction of new unisex rates both men and women now need a pension pot of £152,800 to purchase an annuity income of £5000 per year.
Based on fingures from the ONS, in turn sourced from the Money Advice Service, the table below shows the average size of pension pot required to purchase incomes of varying sizes and how this has changed over time.
|Pension pot size required for a male in 2009||£118,000||£236,100||£354,100||£472,100||£590,200|
|Pension pot size required for a female in 2009||£133,500||£267,100||£400,600||£534,200||£667,700|
|Pension pot size required for a male or female in 2013||£152,800||£305,600||£458,300||£611,100||£763,900|
A continuing government programme of Quantitative Easing (QE) has also been blamed for falling annuity rates in recent years.
QE is the process of printing new money in a bid to kick-start the economy. The new money is introduced into circulation by the purchase of government bonds, forcing down yields. Annuity incomes which are in part based on these yields are also subsequently forced down.
The figures included in this article are averages only and annuity incomes can vary greatly according to other circumstances such as the state of a retirees health or age when they retire.