Several leading providers started this year by raising rates on their standard and enhanced annuities – putting hundreds more pounds into the pockets of those buying a
pension income now, compared with what was offered in the last quarter of 2009.
Aviva, the country’s largest life insurer, has lifted its standard annuity rates by between 0.25 per cent and 1.9 per cent and improved its escalating annuities, which are linked to movements in the retail prices index.
Canada Life has increased its joint-life annuity rates by 2.5 per cent and made a “small” adjustment to its enhanced rates for those in poorer health. Legal & General’s rates went up by 1 per cent on January 1.
Pension advisers say this trend is good news for those nearing
retirement. Last year, they saw annuity rates crash by about 10 per cent to 15-year lows on the back of unprecedented volatility in the gilt market.
There is even a risk that rates may fall again. Some advisers say proposed European-wide rules on insurers’ capital adequacy ratios might lead them to cut their rates again. This week, Axa withdrew from the enhanced annuity market, citing the impact of “Solvency 2” (S2) regulations.
Even if UK interest rates rise, the new rules could hold annuity rates back. As a result, pension advisers say the recent improvement in annuity rates could represent an opportunity for people aged 50 plus to take their pension before the minimum pension age rises to 55 on April 6 this year.
