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Annuity rates
have not yet shown any ill effects from the credit crunch, according
to the Alexander Forbes Annuity Bureau.
Rates have even risen slightly, with Norwich Union’s top level
rate increasing by £60 to £7,100, and Canada Life improving
by £73 to £7,071.
However, while level rates have increased over the last 12 months,
inflation-linked annuities have decreased, with today’s best
annuity rate (at £4,026 from the Prudential) £178 lower
than that in October 2007 (Legal & General at £4,204).
Smokers’ rates, however, have held steady, with Reliance Mutual
providing the best rate at £8,024 per annum.
“With economic doom and gloom in the headlines, it’s
good to be able to report some good financial news,” commented
David Marlow, director at Alexander Forbes Annuity Bureau. “Following
rate cuts last month, we’ve again seen a few small increases
in level annuity rates as we enter October, putting level rates
some five per cent higher than they were in October last year. Unfortunately
it’s likely that we are at or close to the end of the upward
run for level rates.”
Marlow added that the signs were there when many providers cut their
rates. The threat of lowered interest rates, which will try to boost
the economy, is, he says, a potential catalyst in forcing level
annuity rates to lower their levels in the long term.
“Inflation-linked annuity rates have already been slipping
for some time as inflationary pressures start to bite,” Marlow
concluded. “The best rate available today is some four per
cent lower than twelve months ago and it is likely that this trend
will continue into the foreseeable future.”
- Pensions Age
October 2008
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