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Annuity rates continue to fall says Alexander Forbes

Level annuity rates have continued to decline over the past month, with the top rate coming down £48, according to Alexander Forbes Annuity Bureau.

The reduction, which follows a £60 fall in the top rate during October, puts Aegon Scottish Equitable on top of the rate table.

The leading smoker rates remained steady over the past month with Reliance Mutual maintaining its position after bucking the trend in November by increasing rates. The provider is still around £500 a year better than LV=, its closest rival.

Meanwhile, Prudential has scooped the top spot with its inflation-linked rates, with a £131 rise to £3997. Most other leading providers have cut rates, with last month’s leader, Canada Life, dropping rates by £88 to £3910, based on a 60 year old male.

Alexander Forbes director David Marlow expects annuity rates to drop further if the Bank of England’s recent slashing of interest rates filters through to the bond market.

He says: “Current annuity rates will come down further if the recent falls in interest rates feed through fully to the bond market – at the moment, Corporate Bond yields have not declined as sharply as interest rates. This is probably a factor of the credit crunch, with yields needing to be high to attract investment. In the long term, annuity rates correlate closely to changes in UK base rates, so despite the falls this month, rates are still quite attractive relatively speaking. This is particularly the case for those eligible for a smoker annuity rate.”


The emerging question

I asked a question during a press conference the other day and, while that may not sound particularly momentous to you, it certainly felt that way to me. You see, I’ve been doing this investment journalism thing for 12 years now and I’ve rather prided myself on never having said a word at a press conference.

Spread the news

The latest Investment Management Association figures show the UK all companies sector taking the biggest share of an ever decreasing pot in terms of gross retail unit trust sales. I am surprised that corporate bonds are not the number one choice. Why? Because interest rates are likely to be around 1 per cent by February, with all that implies for cash returns.

Groundhog gripes

Having spent a few hours last week sitting in the “cheap seats” costing £300 listening to the FSA’s latest update on the RDR, I have now had time to ponder upon what I saw and heard.


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