View more on these topics

Rate war sends annuities to five-year high

A rate war is raging in the annuity market with rates reaching a five-year high and an unprecedented 39 rate changes already this year.

Hargreaves Lansdown pensions analyst Nigel Callaghan says investors who are planning to annuitise should consider doing so now.

He says: “The battle has been really heating up in recent weeks, with 17 rate changes in the last month alone, 88 per cent of them upwards. This is the highest that rates have been for five years.”

The yield for a 65-year-old male is now 7.66 per cent, 10.5 per cent higher than the yield two years ago which was 6.92 per cent.

Product providers fighting for the top spot include Prudential, Legal & General and Aegon Scottish Equitable.

Callaghan says that the rate war has been caused by a number of factors, including the credit crunch which has led to the spreads on financial corporate bonds widening. Yields on corporate bonds have increased significantly as the value of corporate bonds has fallen, he says.

But Callaghan says the high rates may not last as life expectancy is still increasing which could drive rates down.

However, he says if the economy nosedives and inflation rises, rates may stay at these levels or could go higher.

He says: “Equity values have recovered to some degree since the market falls in January and, looking at current annuity rates, we are starting to feel that this may represent an opportunity for investors. Yields on corporate bonds have widened significantly since last summer, which many retiring investors are taking full advantage of by locking into the highest rates since 2003.”

Informed Choice joint managing director Martin Bamford says: “The markets have recovered a bit but they are still very volatile. Making that judgment remains a very tough choice.”

Recommended

Sticking to valuation discipline when investing in China

Journalist Alexis Xydias discusses the opportunities – and potential pitfalls – of investing in China with Artemis fund manager Peter Saacke. With Peter holding significant positions in China in the Artemis funds he manages, journalist Alexis Xydias quizzes Peter on the risks of investing in Chinese stocks – including over-valuations, margin trading and financial reporting issues. Click here for video

Newsletter

News and expert analysis straight to your inbox

Sign up

Comments

    Leave a comment

    Close

    Why register with Money Marketing ?

    Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

    News & analysis delivered directly to your inbox
    Register today to receive our range of news alerts including daily and weekly briefings

    Money Marketing Events
    Be the first to hear about our industry leading conferences, awards, roundtables and more.

    Research and insight
    Take part in and see the results of Money Marketing's flagship investigations into industry trends.

    Have your say
    Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

    Register now

    Having problems?

    Contact us on +44 (0)20 7292 3712

    Lines are open Monday to Friday 9:00am -5.00pm

    Email: customerservices@moneymarketing.com