That’s the rhyming version, as it is still the festive period. This article is all about getting the right annuity at the best annuity rate. We all know that stockmarkets are off around 30% since the beginning of 2008 and that interest rates plummeting. I have read more news on this today!
Annuity rates did rise to their highest level for six years during the summer and, though they are now sliding slowly, they are still good, and now could be a good time to convert your pension fund money into a pension annuity. We have seen that gilt prices have risen to reflect lower interest rates, but annuity rates have declined only slightly.
Bond and gilt yields, which do underpin annuity rates, have started to come down and some annuity providers, including the likes of Canada Life, Legal & General and Norwich Union, have recently lowered their annuity rates to reflect these changes.
Are annuity rates now on a downward trend? They dropped sharply in the late 90′s because of the findings of the Continuous Mortality Review into longevity, which showed that we are all living longer. But since that time annuity rates have been remarkably stable. Annuity rates are only around 2.5% lower than in the summer in spite of interest rates coming radically down. However, interest rates are going to come down more which will have a continuing downward effect on annuity rates.
Some experts believe we could be facing a slump like the 1930′s. If so, could an annuity provider default and if so, would investors lose their annuity income? Everybody would have the protection of the Financial Services Compensation Scheme (FSCS) if there was such a situation, and for up to 90% of their annuity income without limit.
What if you are looking to purchase a pension annuity in the near future? First, it will pay to shop around and consult an adviser who specialises in annuities. The difference between the best and worse annuity rates in the open market can be as much as 20% and an annuity cannot be switched. For those with health problems the additional annuity income can be much higher.
Proper, good advice is essential. If you are not in good health and suffer from a chronic illness like heart, liver, or kidney disease or if you are a smoker, you can obtain better annuity rates via an enhanced annuity or an impaired life annuity. Perhaps up to 15 per cent higher for smokers, and much more for those who are seriously ill.
Postcodes have recently become an issue for annuity rates too which, actuaries claim, affect mortality. Several major annuity providers, including Prudential, Norwich Union and Legal & General, calculate annuity rates on the basis of where you live. In poor areas where life expectancy is expected to be shortest you will get a higher payout and vice versa.
The title of this piece: ‘Don’t delay. Buy that annuity today.’ reflects all the above and does stand up if you are looking to buy an annuity soon. Do it before annuity rates drop.
