Annuity rates set to increase…..
Some good news for retirees and if you believe the Telegraph then you will expect a 10%increase in annuity rates in the not too distant future, see here. Essentially the article focuses on the recent increase in Gilt rates, from an all time low last year of 2.06% to 2.6% now with a further increase expected of up to nearer 3.2%. This increase should have a direct result in increasing annuity rates by around 10%.
Although we know that the big companies are quick to decrease rates but find it quite hard to then increase rates, we all know the same happens with our Gas Bills. That being said we have seen a steady increase in rates since the start of the year. Its not been huge but much of this was natural as rates had to come back up after the influx of business due to gender equalization late last year. Essentially men and women are on the same rates where as previously men would have had better rates as they were expected to die sooner. As many males decided to cash in their pension on the back of this scare in the industry it did lead to providers reducing rates in the run up, in fact they dropped by over 10% in the last few months of 2012. This led to an increase in rates in the start of the year and that coupled with the increases in Gilt rates, good movements in the stock market are all helping to paint a better picture about annuity rates.
Overall the main factor that hits annuity rates is mortality, medical science is such that we are all living longer and this means annuity companies are paying out longer and therefore rates are not as good as they were 10 – 15 yrs ago. Personally I feel that these figures cant increase consistently or we would all be living forever so I would hope the ceiling has been reached and other factors will effect rates, namely Market conditions and gilt rates. With this theory in mind then annuity rates are on a level and in theory should only go up but it must be said that rates are not going to go up by much and they will hover around where we are now for the foreseeable future.
Taking all of this on board the cost of delay is still going to have a greater effect on people. Delaying a purchase by 6 mths to a year can have a detrimental effect on your overall pension payments, often by between 10 and 15yrs, basically as you are not taking an income whilst you are waiting for a better rate, the income lost is going to tkae 10 – 15 yrs to catch up. Often this can increase to 20 – 25 yrs depending on the size of the fund.
Conclusion, yes rates are likely to increase slightly but its not going to be enough to warrant hanging on to retire at the ‘right time’, though this is good when you are due to take an income then that is the best time to take it. Ask for a quote from ourselves and use the form opposite.