Good news for pensions

Good news on money front.
Good news on money front.

Tales of disappointing retirement incomes have become depressingly familiar in recent years, but experts say the situation could finally be looking up.

Financial information website Moneyfacts has found that annuity rates, which set the size of your income for the rest of your life after you finish working, saw a record year of growth in 2013.

When people retire, they use the money they have accumulated in their pension pot to buy an annuity. Annuity rates are set by insurance companies, and buying one is a long-term investment decision. There are several different types of annuity - some will also provide an income for loved ones after your death and others take ill-health into account.

Whichever one you choose though, the rate you end up with will decide how much money you have for the rest of your life, so it’s essential to pick carefully.

Moneyfacts said that after falling to a new low in March 2013, annuity rates then rallied strongly for the remainder of the year.

Significantly, 2013 marks the first calendar year since 2007 in which annuity income has increased, putting an end to five years of falling rates.

Until last year annuity rates had been in general decline for some time, in part because people in the United Kingdom are now living longer.