Annuity rates fall further

by Gill Montia

Story link: Annuity rates fall further

The Alexander Forbes Annuity Bureau has reported a further decline in the level of annuity rates, in November.

For a 60-year-old man with a £100,000 investment the top rate fell by £48 during the month, to £6,992.04, although less than a month earlier when the top rate slid £60.

Leading smoker rates remained steady during November, with Reliance Mutual maintaining its leading position, according to Alexander Forbes’ research.

However, the firm, which has been giving independent advice on annuities since 1991, expects rates to fall further in the months ahead.

Director, David Marlow, explains that cuts in the Bank of England’s base rate could filter through to the bond market, despite the fact that corporate bond yields have not so far declined as sharply as interest rates.

Mr Marlow adds that this resilience is probably due to the credit crisis which has meant that corporate yields need to be high to attract investment.

He warns that in the long term, annuity rates closely mirror changes in the base rates.

According to the company’s analysts, in the current climate, the difference between the best and the worst conventional annuity rates can be as high as 27%.