Poor investment returns and increasing life expectancy is having an adverse impact on rates for annuities, according to pension experts.
From December last year to the end of March this year, overall rates for annuities fell by 0.58%. Although this is a fall, it is slower than the fall between June and Novermber of last year, which was 1.64%. Rates for enhanced and standard annuities also fell in the last four months, but at a slower rate compared to last summer. This demonstrates that annuitants really do need to shop around between each provider in order to secure the best rate.
Most pressingly, those who qualify for enhanced rates need to ensure they are offered these from prospective insurers. This is because the average difference in annual income comparing a standard annuity to an enhanced annuity was “22.7% for men in November to March and 22.6% for women.” Based on a £50,000 pension fund, this would mean an additional £3,663 for men £3,404 for women in the first five years,
Pension guru Craig Fazzini-Jones from MGM Advantage forecasted future falls saying that “…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%.” .
