Annuities Explained Recent Annuity Trends


Recent Annuity Trends

What have the annuity trends been like in the past?

Recent trends in annuity rates show that they are rapidly decreasing as people are living longer. Therefore insurance companies are reducing their annuity rates to allow for this increase. Following current trends, the earlier you take out your annuity, the better the rate you are ever likely to get. Buy delaying purchasing an annuity you will lose the income that you would be receiving with an annuity, and when you do decide to buy and annuity, the annuity rates will most likely decrease. Buying now means that you have a guaranteed rate of that annuity and this cannot be reduced once it has been set up.

2009 a bad year

2009 was a remarkably bad year for annuity trends. It was named ‘the annuity crunch’, as annuity rates fell by 8% during the year. There were a number of reasons why annuity rates fell so much, firstly, a main factor was due to a big fall in gilt yields by the Governments policy of quantitative easing, otherwise known as ‘printing money’.

It was reported that the annuity rate fall of 8 percent in 2009 is the largest fall since 2002 when rates fell by 12%.

Will they rise or fall again?

This is the question many people want answered.

It is hard to predict exactly what is going to happen, however, for those approaching retirement; the best advice would be to invest in safer funds to avoid the risk of falling equity values and falling annuity rates.

General Outlook

The general outlook is that it is unlikely that annuity rates will change significantly, unless there are substantial increases in yields. This news will be welcomed by people who are a long way from retirement but not so by people who are approaching retirement.

Predicting annuity trends is far more complex than it has been in the past. Fewer insurance companies invest the money used to buy the annuities into gilts, choosing instead to invest in other things such as corporate bonds or commercial property.

Post Coding Effect

Another main factor regarding annuity rates is what is known as the ‘post coding effect’, with many top providers pricing annuities based upon where people live. People in regions who tend to buy healthier foods are predicted to live longer healthier lives. The healthier the town, the smaller the annuity income offered.

In spite of this, 8 in 10 annuity owners say that annuities are safe and secure and provide an important source of retirement security.

You will all have your own different personal situations, as such there is no hard and fast rule regarding the perfect annuity options. Consulting an IFA is always advisable concerning your retirement plans.

Thinking of Retiring Soon? Have a look at our Annuity Comparison Table

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