It appears that rates may be on the increase with several leading pension annuity providers increasing standard and enhanced rates at the start of 2010. This will mean an increase in retirement income for thousands of annuitants in the UK. Aviva has raised their standard annuity rates as well as boosting escalating annuities, which are tied to fluctuations in the RPI (inflation rate). On top of this Canada Life has raised its joint-life annuity rates by two and half percent as well as marginally raising its enhanced rates. At the start of 2010, Legal and General also raised their rates by 1%
Pension experts are welcoming this boost in rates and say this is a positive step forward for the industry. 2009 was not the best year for pension annuities with rates falling some 10% to a 15 year low, due to what has been described as “unprecedented volatility in the gilt market.” And we may not be out of the woods yet as some are predicting further falls this year.
Pension industry observers have also noted that changes to capital adequacy ratios could lead to rates tumbling again. The gist of the changes to the rules is that insurers may now be forced to hoard more capital and so will have less to offer in terms of annuity payments. But not all types of annuity may be available from all providers, as AXA demonstrated recently when they withdrew from offering enhanced annuities, citing“Solvency 2” (S2) regulations.
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