Pension payouts fall for third year in a row

Average pension payouts dropped by another 2.7 per cent last year, the third consecutive annual fall, new figures show.

The rates paid on annuities, which convert pension funds into a guaranteed retirement income, have now been slashed by almost half in just 16 years, according to Investment Life & Pensions Moneyfacts.

It said the annuity rate available to the average male retiring now is 46 per cent lower than in January 1995, and 43 per cent lower for female workers.

The best standard annuity rate on offer a year ago to a 65-year old male with a retirement fund of 10,000 secured a monthly income of 678. The best rate available to those retiring this month is currently 647, a drop of 4.5 per cent. The best monthly annuity income available for the equivalent female retiring this month is 608, down 4.1 per cent from 634 a year ago.

The average annuity rate available to the male counterpart in January 1995 was 1,138, more than 46 per cent higher.

Last year's decline would have been considerably steeper but for a rally in the last four months of the year, when most leading providers increased their annuity rates. That has continued into the New Year, with Aviva hiking both its standard and inflation-linked annuity rates this week.

But Richard Eagling, of Investment Life & Pensions Moneyfacts, said the recent rally was likely to prove only temporary respite from the long-term downward trend in annuity rates.

"Among the key influencers of annuity rates are the yields on gilts and corporate bonds, and unless these continue their recent upsurge for a sustained period, annuity rates are likely to remain in the doldrums."