Standard Level annuity rates: There was no change to the provider positions this month but all have reduced their rates as an unwelcomed result of falling gilt yields.
Legal & General maintained the top spot for both Single and Joint Life, paying £5,518.44 and £5,102.76, a decrease of 2.25% (£126.96pa) and 2.05% (£107.04pa) respectively from last month's figures. The largest percentage rate change came from Prudential, which decreased its Joint Life income by 2.60% (£120.12pa). The smallest change came from Canada Life, which decreased its rates for Joint Life income by 0.23% (£11.52pa), but this wasn't enough to move it from second position.
Standard RPI Linked annuity rates: Again, the provider positions remained the same this month. Legal & General leads the way for Single Life RPI, with an income of £2,985.48pa, a decrease of 2.24% from last month. This wasn't the biggest fall though, that goes to Aviva which dropped its rates by 2.94% and is now paying £2,752.56. Despite Standard Life reducing its rates for Joint Life RPI by 2.06% (£54.84pa), it held on to the top spot. Canada Life, which is in fourth place for Single and Joint Life RPI, made smaller reductions of 0.06% and 1.36% respectively, so is paying £2,745.00pa for Single Life RPI and £2,429.76 for Joint Life RPI.
Smoker rates: Enhanced annuities were not immune to the effects of falling gilt yields, although not all providers slashed their rates. At the bottom of the table for Single Smoker rates, Just Retirement and LV= made small increases of 0.08% and 0.55% respectively. At the top of the table, and despite a 2.20% reduction, Legal & General remained in first place, paying £6,534.72pa, £146.88pa less than last month. Just Retirement moved into the top spot for both Joint Life tables, paying £5,879.88pa (0.89% reduction) and £6,458.40 (1.13% reduction) for Male 60/Female 57 and Male 65/Female 63 respectively. A reduction of 1.47% from LV='s Joint Life for Male 65/Female 63 was the largest for Joint rates and equates to £93.12pa and sees them remain in fourth place for this and the Male 60/Female 57 rate table.
(All rates are based on £100,000 Purchase Price, with no guarantee period, and payable monthly in arrears)
James Auty, Head of The Annuity Bureau from JLT, comments:
"Annuity rates improved significantly during 2013 largely due to falls in the price of UK government bonds. Insurers purchase government bonds to back the annuities they sell, so if the price of bonds falls, then they can offer more competitive rates.
"The trend of falling bond prices reversed in January 2014. Market concerns with the strength of emerging market economies, such as Turkey, India and South Africa spread to developed equity markets, illustrated by a 3.5% fall in the FTSE 100 Index. Much of the money taken out of developed and emerging equities moved into safer assets like UK government bonds. This led to an increase in demand and a corresponding increase in price. This pushed down annuity rates leading to poorer value for individuals retiring during the month.
"In monetary terms, the biggest fall was seen in the Single Smoker rate, with the highest rate, from Legal & General, decreasing by £146.88pa over the last month. The accumulated loss over a typical 20-year retirement equates to almost £3,000.
"Recent rises and falls in annuity rates emphasise how being savvy at this stage in your life is essential and people must make use of the open market option. In fact, I would confidently say that for the majority of cases, the institution with which a person has saved is unlikely to offer the highest annuity rate. There are no 'bonus points' for loyalty and those approaching retirement could simply be throwing away their hard-earned savings if they stay with the same provider."
For more information on the latest annuity rates or retirement services please contact The Annuity Bureau on 0845 072 6774 or visit www.annuitybureau.co.uk
Rates as at Monday 3 February 2014