Never mind best pension annuity rates, what about the pension fund buying the annuity. It is important; getting the best pension annuity rates in the UK is just no good if your pension fund is just not large enough. Now, insurance companies (the annuity providers) sell annuities, which are basically a guaranteed retirement income payable for the rest of your life. This is actually calculated on your chances of living, your life expectancy, with most people buy an annuity in their 60’s with their hard earned pension funds. It’s probably fair to say that these people want the best retirement income available to them when spending that pension fund. Because this is a one-off purchase, once it’s done, it’s done.
The average life expectancy of a man aged 21 today is nearly 87. To be able to guarantee him an annual income of £21,244 for the rest of his life, insurance company (annuity provider) Canada Life charges a price tag of just over £2m. Naturally, a man aged 40 now will not live as long, so he will be charged a price tag of £1.27m. Now, because the median average income of a woman is lower, the pension annuity is cheaper, according to Hargreaves Lansdown. They found that Canada Life would charge a woman of 21 £1.66m. This will guarantee that she receives an annual income of £17,104 for the rest of her life. She is actually expected to live until she is aged just over 90. And for a woman of 40, the price tag is £1.07m. Naturally if higher UK annuity rates were available the calculations would be different, but that’s complicated.