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Annuities reach four-year high

Annuity rates have reached their highest level for four years but further rises depend on movements in bond yields, says Annuity Direct managing director Stuart Bayliss.

He says improvements in annuity rates are due to a substantial increase in long-term gilt and bond yields and the last six months have seen a succession of rises as the leading providers compete to provide the best rates.

Bayliss says: “The improvements in yields have largely been passed on in improved annuity rates. This has happened despite the improvement in life expectancy which pushes rates downward. To continue to compensate for improving life expectancy, yields need to keep going up or annuity rates will start to fall.”

Aspen annuities director Billy Burrows says he does not expect the trend to continue and urges people not to delay buying an annuity.

Burrows says: “About a month ago, we went through quite an unusual period where the stockmarket and annuity rates have been rising but this all changed with the market crash last week. I do not think the high rates are going to continue for too much longer.”

Meanwhile, Bayliss is warning that annuity tables can be misleading as they only show a snapshot of the rates offered.

For example, he says Aegon Scottish Equitable has been top for funds of £40,000 or more over most of the last six months but has never been top for a £10,000 purchase price.

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