According to Alexander Forbes Annuity Bureau, only one major annuity provider failed to cut its rates in the wake of the emergency budget last month. Saga, were cited as the only company who did not reduce rates in June. A typical level annuity from the company for a male with a fund of £100k would yield an annual income £6180 per annum. Other providers such as Legal and General and AXA have cut their rates on some of their products. In the main smokers rates remained fairly constant however, with Reliance Mutual offering one of the best deals around.
Tim Whiting from the Bureau said that… “...the downward trend in annuity rates has reasserted itself as we enter July – but there are some positive signs with Saga in particular resisting the urge to cut.” It appears that while investors have been reassured about the UK’s viability as an investment opportunity, rates have suffered as a consequence. Gilts are often seen as a safe bet by investors, so when other stocks appear to be more risky, they [gilts] become more popular. This increases the price of gilts but lessens the yield, culminating in a lower return. This is turn encourages providers to cut annuity rates.
