Pension annuity interest rates are at their highest for five years, despite the credit crisis, research from Investment Life & Pensions Moneyfacts has shown.
The first quarter of 2008 saw pension annuities
falter slightly, but average rates recovered to rise above what they were in December last year. Despite the global credit crunch, and following a 30 per cent drop during the last decade, annuity rates improved six per cent in 2007 – their highest level in five years.
A high number of rate changes over recent weeks suggest that providers want to pass on improvements to customers, but Moneyfacts still urges customers to shop around and source the best deal for their personal circumstances.
While annuity rates
have experienced a period of growth recently, Moneyfacts warns that customers can still get caught out by a bad deal if they fail to do their research, as differences between the best and worse rates can be as much as 20 per cent, and ill health benefits can have a significant effect on the income payable.
With life expectancies on the increase – women now live, on average, for 20 years after the age of 65 and men for 17 years – getting the best deal can make a considerable difference to income and lifestyle.
Even though rates have bounced back recently, they are still a long way from what they were a decade ago. The average rate for a 60 year old, who bought an annuity
with a purchase price of £10,000, has fallen from £883 in 1997 to £622 10 years later for men, and for women the drop is even more substantial, from £801 10 years ago to £582 in 2007.
"Although rates are at their highest level for some time, continued uncertainty in the economic environment means that there is no guarantee that rates will remain at this level." said Suzanne Greener, deputy editor of Investment Life & Pensions Moneyfacts.
"Equally, it's essential that pensioner's either take time to find the best annuity deal for themselves to suit their individual circumstances or take advantage of an adviser's expertise."
© Fair Investment