annuity rates are falling in spite of some predictions that they would rise in the second half of 2010. This was based on the assumption that government interest rates on borrowing would increase after the June emergency budget. However, it looks like the reverse may have happened, and that there may not be any rise in rates until well into 2011.
Retirement Partnership boss Steve Lewis noted that the continuing rise in life expectancy would create downward pressure on rates. He also highlighted the changes to accountancy rules which would impact on how much insurers can offer. He said that…“…a second problem for the insurance companies when setting annuity rates is that new accounting rules are being introduced for the whole of Europe’s insurance industry. This means that providing annuities will cost the insurance companies more and they will therefore pay less.”
So with rates predicted not to rise, coupled with the introduction of new pension rules which remove the compulsion to buy an annuity, the volume of annuity sales in the UK could fall as a direct consequence.
