Annuity rates are likely to drop further, even after reaching a two-year low last month warned the Annuity Bureau. They have issued the warning following a drop in the 15 year gilt yield to 4.19%, its lowest level since June 2003. They believe that as annuity rate movements generally mirrored those of the 15-year gilt yield, further drops in annuity rates could follow. Some providers have been reducing their annuity rates in the last couple of months, such as Canada Life, GE Life, Legal & General, Prudential, Norwich Union and Reliance Mutual.
Although this seems to be a short-term movement, the Annuity Bureau believe that rates will remain relatively flat for the rest of the year.
Our view
We totally agree. Certainly much of the advice that we offer has been based upon our expectations that long term interest rates are falling, that we are living longer and that annuity rates will worsen, with periodic blips where we get temporary increases.