These findings show that the annuity market is starting to recover from what has been a very trying few months.
Doncaster, South Yorkshire (PRWEB UK) 27 June 2014
My Pension Expert data has revealed a rise in the best annuity rates available during the month of June. It’s the first time since the budget announcement that their figures have shown a monthly increase and would seem to indicate that the rates are in recovery following the pension bombshell that was dropped by George Osborne in March.
My Pension Expert’s Annuity Rates page monitors the market and picks out the best rates available. It uses the criteria of a 64-year with a £100,000 pension pot to invest in a single-life policy and then applies various lifestyle factors which can impact upon the amount a provider is willing to offer.
The announcement that the purchase of an annuity was no longer compulsory at retirement has obviously substantially reduced the demand for the product and as a reaction rates had begun to slide. During the month of April, MPE recorded a -0.217% fall in the best standard annuity rate and a -1.323% drop in the best annuity for someone who is classed as obese.
Things only got worse during May as significant drops to the rates for both a smoker (10 cigarettes daily) and a drinker (56 units per week) occurred, dropping by -2.138% and -2.152% respectively. That means that the smoker was now being offered £150 less and the drinker £137 than they were at the end of the previous month.
However, during the month of June, this downward spiral has been halted and replaced by the green shoots of recovery. Week on week, the rates have been climbing out of the trough that the budget announcement created for them, as early signs seem to indicate that perhaps the worst is over.
This month MPE has observed a number of increases in the rates. The standard annuity rate has gone up by 0.603%, the enhanced annuity rate by 0.592%, the smoker rate by 1.367%, the obese rate by 0.951% and the drinker by 3.325%. That works out at an extra £36, £42, £94, £61 and £209 respectively. It’s the first time since the budget announcement that all five rates have increased during a calendar month.
Scott Mullen Director at My Pension Expert said, “These findings show that the annuity market is starting to recover from what has been a very trying few months. No-one expected the degree of change that came with the budget announcement and its revolutionary rather than evolutionary nature caught everyone off-guard. This month’s improvements could be the result of a number of factors. Such as the slight improvement in gilt yields which are intrinsically linked to annuity rates, or providers could be trying to entice consumers back into the market having seen their sales figures fall dramatically. Whatever the reason it is clear that it’s the consumer that’s benefiting, as higher rates mean greater income.”