We all know Annuity rates have fallen over recent years and lower gilt yields have reduced Annuity rates still further over the past few months. As the trend is still downwards and with no sign of an increase anytime soon, we thought we would take a look at who is offering the best rates at the moment.
All of the figures below assume funds of £100,000 are used to buy the Annuity; that income is paid monthly in arrears; and no account has been taken of health or lifestyle issues such as smoking, which could help to push up the Annuity rate.
For a male aged 60, requiring a level income with no guarantee period, Canada Life offers the best income at £5,489 per year, retiring five years later pushes the income to £6,204, again offered by Canada Life.
A female aged 60, again looking for a level income with no guarantee period, would also get the best rate from Canada Life with an income of £5,307 per year, at age 65 this income rises to £5,944.
For a joint life Annuity, where the male is age 60 and the female 57, with a 10 year guarantee and a two-thirds spouse’s pension, Legal and General Annuities offer the best income at £4,859 per year. Five years later, when the male is aged 65 and the female 62, Legal and General still offer the best Annuity rate, at £5,232 per year.
If it was the female aged 60 buying the Annuity, and assuming her husband is three years older, Legal and General would again provide the best income, assuming a two-thirds spouse’s pension and 10 year guarantee period, at £4,942 per year. If the couple were five years older, the income would rise to £5,341 per year.
These figures emphasise the importance of shopping around for the best rate.Prudential, for example, offer Annuity rates for these circumstances of approximately £350 per year less than the best quote from Legal and General.
Level or indexed
If you want your income to rise each year in line with RPI the starting level will fall by around 40%, with Legal and General and Prudential offering the most competitive rates.
Enhanced Annuities are available for those with health or lifestyle issues. Even relatively minor complaints, such as high blood pressure, raised cholesterol or diabetes, which might not cause issues on a day to day basis can qualify. If you have smoked or drunk more than the recommended weekly amount of alcohol for a prolonged period of time, you will almost certainly qualify.
Enhanced Annuity providers such as Just Retirement, Aviva Annuities or Partnership Assurance individually underwrite each Enhanced Annuity application. It is therefore not possible to give example quotes here. However, if you think you might qualify for an Enhanced Annuity it is important to check out whether or not you do, it could significantly increase your Annuity rate.
As Annuity rates have fallen it has never been more important to shop around.
To get the best rate possible use the ‘Open Market Option’, check whether you qualify for an Enhanced Annuity and don’t take the first quote you get.
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