Annuity rate down 2.38% in Q3

 The average standard annuity rate fell by 3.01% in the third quarter, while enhanced rates fared slightly better, reducing by 1.88% over the same period.

The average annuity today, of £3,074 per year (based on a £50,000 purchase price) would pay £2,058 less income over an average retirement compared to the equivalent annuity purchased in March (paying an annual income of £3,172).

Aston Goodey, sales and distribution director, MGM Advantage, said:

"Annuity rates have tumbled over the past quarter due to the yields available on gilts and other fixed interest investments, as well as the uncertainty remaining in the market following the Budget. Unfortunately, this all means people who buy an annuity today will receive less income over retirement than those people who purchased earlier in the year. The difference in rate can make a significant difference in the amount of income over an average retirement.

"People looking for a secure income need to shop around, and ensure the company providing the annuity is considering their individual circumstances when calculating the annuity rate. All aspects of a customer’s details are relevant when trying to achieve the best rate, from age and occupation, to where they live, as well as their overall health and lifestyle.’"

Commenting on the future for annuity rates, Aston Goodey said:

"The outlook for annuity rates remains unpredictable. Any improvements in interest rates and the yields available on gilts should help move rates up. However, the market is talking about the middle of next year before we are likely to see any increase in interest rates. We also have Solvency 2 looming over us, and the obvious impact that will have on the capital adequacy of annuity providers. As we move through into the new-year, we may see rates improve in the more competitive parts of the market, as providers seek market share."