Annuity Rates fall in January 2012

by Oscar James on January 23, 2012

Annuity Rates have fallen at the start of 2012 according to figures supplied by one leading source.  They say that both enhanced and standard rates have fallen in the last three months, by 4.7% and 2.45% respectively. This means those approaching retirement will have a lower income as a consequence. In fact rates have fallen by one tenth since June 2009, whilst at the same time inflation and the cost of living has been rising. One commodity that has risen faster than any other is the cost of gas and electricity, something which is retired and elderly people need more than anyone else in order to survive the cold winter. Gas has rocketed up 67% in price since the summer of 2007, while electricity has gone up by 28%.

There are a number of reasons why annuity rates continue to fall but the main one is that gilt yields (the return investors gain on the purchase of government bonds) have also fallen to record lows. This is because investors looking to invest in national governments see the UK as a safe haven due to it’s maintenance of a triple AAA credit rating. As UK government bonds become more popular to invest in, so the price of these bonds increases. This means that the yield is then lower and that is what drives down annuity rates, which means less money for those about to retire. Consider that in 1990 annuity rates were double there current levels, meaning someone retiring then would have received twice the amount someone retiring today would with the equivalent pension fund.

Industry experts are advising anyone about to buy an annuity to shop around the market for the best deal possible. Rates and annuity products can vary between providers to it is essential that individuals compare providers. This can make a real difference to the amount of income that can be gained, for example anyone who is eligible for enhanced annuities could see their income rise by as much as 40% or more. Unfortunately although most retirees are thought to be eligible for these enhanced rates, only ten percentage of all annuities purchased are indeed enhanced. This is because most people buying an annuity are unaware that you must shop around for the best deal.

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  1. How will Annuity Rates fair in 2012?
  2. Compare Annuity Rates

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