Retirees who delay buying an annuity for two years in the hope of rate rises are unlikely to ever recoup the money they would ‘lose out' on, a provider has warned.
MGM Advantage said gilt yields and annuity rates would remain low for the foreseeable future and delaying buying an annuity by two years could see retirees miss out on thousands.
It said a 65-year-old man with a £100,000 pot could buy a yearly income of £5,901 today. A 67-year-old man with the same pension could get a better income of £6,165.
By delaying annuity purchase he has increased his income by £264 a year - but he has also missed out on two years total income, equating to £11,802.
It would take about 44 years to recoup the lost money, while average life expectancy for a man aged 65 is 21 years in retirement.
Andrew Tully, pensions technical director, MGM Advantage said: "With annuity rates at an all-time low it could be very tempting to delay your purchase if you can afford to in the hope rates will recover. But all the signs indicate annuity rates will remain low in the short term - you would need a significant increase in rates, or a change in your circumstances like ill health, to make the wait worthwhile.
"With a huge choice of retirement options available, including investment linked-annuities for those who wish to take on some investment risk as a hedge against inflation, a financial adviser can help you maximise your retirement income.
"Shopping around for the best deal is crucial as simply accepting the rate offered by your pension provider could potentially leave you short changed by as much as 46% of your income. It could be the difference between a retirement worth working for and one where you struggle to make ends meet. It really is that simple."
The firm said its calculations did not take any further rate falls into account.
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