17 May 2010
Annuity providers have warned UK retirees could receive a lower
pension income from their annuities due to the eurozone's
£617bn financial rescue package. A sharp fall in annuities
coincided with the UK's introduction of the European quantitative
easing (QE) policy last year.
While the financial package announced by the European Central
Bank (ECB) did not confirm QE, many think it will inevitably have a
longer term affect on European sovereign rates and, as a result, UK
annuity rates.
Prudential commented: "It is conceivable that the fiscal measure
announced recently by the ECB could have an impact on annuity rates
here for the same reasons that UK domestic QE had in March last
year. If the ECB's fiscal plan involves buying up eurozone bonds,
this could result in an increase in the price of gilts, causing the
interest on them to fall. This could cause some annuity rates -
based on bond yields - to fall."
