Pension savers could be losing out on monthly income because annuity rates are still falling, according to MGM Advantage.

Research from the MGM Advantage Annuity Index, which tracks the income paid on standard and enhanced annuities showed that rates on standard annuities fell by as much as 2.16 per cent and enhanced annuities dropped by up to 1.33 per cent last year. And figures for the month leading up until March 2010 show that rates have continued to fall over the last quarter by as much as 0.58 per cent.

Following these results the financial service company has warned that savers putting money away for retirement should invest in the stock market to get a better return on their investments and offset the falling value of annuities.

On a £50,000 pension pot, MGM Advantage warns that on average men who chose a bottom quartile enhanced annuity could find themselves £2,297.60 worse off over the first five years of their retirement. The corresponding figure for women would be £2,237.40.

Craig Fazzini-Jones, Director at MGM Advantage said: “We expect that annuity rates will continue to fall for some time, especially with the introduction of new regulation such as Solvency II that could reduce rates by up to 20%. 

“We strongly believe that those approaching retirement need to consider maintaining exposure to the stock markets in order to potentially generate better returns and negate the impact of inflation. Our recently launched Flexible Income Annuity allows exactly that – an element of investment risk and an enhanced level of income through retirement.

“As rates continue to fall, it is imperative that people approaching retirement shop around to find the best solution. People work so hard to build-up a pension pot over their working lives and they should not let all this hard work go to waste.  We want to see that they are getting the income and lifestyle they deserve in retirement.”

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