This is a brief guide to the best UK annuity rates. First we have standard annuity rates. These apply if you’re considered fit and healthy and you’re not a smoker, with the opportunity for higher rates for lifestyle issues, and where you live. We could find you annuity rates 20% higher than those from your existing pension provider. Then we have smoker annuity rates, which apply if you’re fit and healthy and also a smoker; with annuity rates varying depending on how much you smoke. These rates could be up to 20% higher than standard annuity rates; and even higher if you also have ill health.

Next on the list of UK annuity rates is enhanced annuity rates. These apply if you suffer from ill health, whether you’re a smoker or not; with much higher annuity rates for those more severe, possibly life threatening, medical conditions. These annuity rates could be up to 30% higher than standard rates, or possibly even more. In addition to this we have lifestyle issues which can effect annuity rates; whether you smoke, if you’re overweight and by how much, how much alcohol you consume, and what your previous occupation was whilst at work. Annuity rates could be around 20% higher, depending on the different issues involved.

We also now have postcoded annuity rates, postcode annuities, so now where you live can make a difference to the rates you’re offered. Postcode annuities result in those living in less wealthy areas getting higher rates than those living in more prosperous areas. These postcode rates could be 5% – 10% higher than standard annuity rates. More and more people are now eligible for these higher annuity rates. Various factors effect annuity rates offered. The more factors that apply the higher the annuity rates will be. Check if you’re eligible, because higher rates could be the best annuity rates for you, and could give a real boost to your retirement income.

Getting the best annuity isn’t just about the best annuity rates. There’s a statistic, around 40% of people at retirement are actually eligible for enhanced annuity rates, but only a few apply; the rest lose out. I’m sure it’s true, but there are other issues to consider, and it’s not just about getting the best annuity rates. You need to make sure you purchase the right annuity with the right options, and this is especially important if you have ill health or if you have dependants. For example, if you suffer from ill health you should be considering an enhanced annuity contract rather than a conventional annuity, and, if you’re married, you should be thinking about a joint life annuity rather than a single life version. Then there’s inflation to consider, and what happens to your hard earned investment should you pass away shortly after buying your annuity.

Our view is that you should be prepared to take advice as it can make a significant difference to your annuity income. Many people are much better off in their retirement as a result of taking annuity advice when purchasing their annuity. It is such an important financial decision, often with many tens of thousands of pounds involved, and one that you really can’t afford to get wrong. You could live until you’re in your 80’s, health permitting, so the financial decision you take now has crucial long term consequences, and buying the right annuity with the best annuity rates can result in thousands of pounds of extra income over the course of your retirement, but it needs to have the right options.

Will future UK annuity rates be higher? Or will they be lower? It is difficult to predict future annuity rates, and whether their trend will be up or down. The once quiet world of annuity rate pricing is rapidly changing, as the various annuity providers (the insurance companies) try to manage the various new and unexpected factors that determine the annuity rates they offer to retirees. The government’s Quantitative Easing (QE) policy might well be at an end, though we aren’t exactly sure about this situation. If it ends it could lead to a fall in gilt prices and therefore an increase in gilt yields. Insurance companies use this gilt yield, amongst various other things, to calcualte annuity rates.

What about the situation we keep reading about in Europe? Every day we are reading more about the weakness of the Greek economy as well as the Euro currency in general and all this is adding doubt to the resilience of the overall European debt market and is causing something of a surge in their debt yields. This isn’t exactly good news but it could actually lead to an increase in UK annuity rates if  UK inflationary figures rise from their current lows.

What about deferring purchasing your annuity? The news about the various economic issues around the world might well tempt people approaching their retirement to put off making a decision about purchasing an annuity until annuity rates hopefully increase. However, this could be quite a risky strategy. Insurance companies are likely in the near future to be forced to maintain far larger capital (or cash) reserves, possibly at the expense of the pension annuity rates they offer, due to major new European financial legislation, which actually comes into force in 2012. This legislation could force annuity rates to be reduced by as much as 20% according to some experts.

Yes, it’s true, annuity incomes to fall if UK annuity rates get hit. Experts are suggesting that pensioners are going to face a Solvency II fallout. Therefore, annuity rates could plummet by up to 30% as a direct result of changes to capital requirements under the incoming European Solvency II directive, Bob Bullivant , chief executive of Annuity Direct warned. Mr Bullivant said anyone opting to retire sometime after 2012 was likely to catch the bitter fallout from the European legislation, which he said would have a profound effect on the annuity incomes of up to 500,000 people.

Solvency II rules look at the prudential, or capital, regulation of insurers, and aim to be standardised across the EU. Mr Bullivant said if Solvency II was approved as it stands, it meant that from 2012 life insurance companies would be obliged to value their annuity liabilities using government gilt rates, rather than the current option of corporate bonds, which give a higher yield, and therefore higher UK annuity rates. He added that the result of this lower income to the larger life insurers means they will have to hold more capital to meet their pension annuity pay-out liabilities, and the knock-on impact is that annuity rates will fall dramatically, with most insider estimates being anywhere between 20% - 30%. Importantly, pensioners need to be aware of this potential problem if they defer their annuity purchase.

It’s probably right to say that we are seeing more bespoke pension annuity rates, perhaps more individual rates, these days, with so many different factors being taken into consideration. It’s not just about your age, your sex, and the size of your pension fund any more. Even standard annuity rates are more complex now. There’s a wide variation in these rates available from the various providers, and finding the best annuity rates could give your annuity income quite a significant boost. But what’s involved nowadays?

Factors taken into account include your age, gender, pension fund, marital status, where you live, your occupation whilst at work, your health and your lifestyle, the type of annuity, and the options you select. With enhanced annuity rates there are more factors to consider, and they are even more bespoke annuity rates than standard ones. Why? Because in addition to the above information, full details are required of any medical conditions, and details of any medication, in order to come up with the best annuity rates. 

Smoker annuity rates could also be considered to be bespoke, and for two main reasons. First, the majority of smokers of retirement age also suffer from ill health, and therefore the above would apply, as these people would actually be eligible for enhanced annuity rates. Secondly, how many cigarettes a person smokes on a daily basis, for example, can affect the annuity rates on offer, so yet another consideration to bear in mind.

You could obtain increased pension annuity rates for the following reasons: you worked in a manual, more risky type of occupation (e.g. a miner); you live in a more deprived area (the Gorbals); you suffer from ill health, severe or mild; you take prescription medication on a regular basis; you’ve been hospitalised for a period due to a medical condition; you smoke; you’re overweight; and there’s more. So, the conclusion is that to find the best annuity rates you should speak with an adviser, and take advice.

Finding the right annuity rates could provide you with a much improved retirement income of 30% (or perhaps even more) higher than the pension annuity rates available from your current pension provider. So you need to be prepared to discuss your individual requirements and circumstances in detail with an adviser, and be prepared to take advice. It could prove to be financially well worth it.