09 December 2008
Falling interest rates add up to bad news for anyone facing
imminent retirement. With the returns on government bonds (gilts)
hitting new all-time lows this week the rates from annuities - the
income for life retired people buy from their personal pension and
money purchase plans - have tumbled again. And these could fall
further.
Annuity rates are calculated by a combination of the yield from
gilts and "longevity" - how long buyers are likely to live.
Figures from IFA Hargreaves Lansdown show the benchmark 65 year
old male level annuity (guaranteed to be paid for five years even
if the annuitant dies) has dropped by 2.2%.
In the past week, Norwich Union, Prudential and Canada Life have
cut their annuity rates of between 1.5% and 3.5%.
