Prudential offering highest paying annuity for over 65s against rising competition
The Prudential is offering the top paying level annuity for men and women aged 65 on a single life basis as rates come under pressure in the low gilt yield environment.
According to the Annuity Bureau, Prudential is offering a level annuity of £8,868.60 per year for a man aged 65 on a single life basis and with a £100,000 purchase price as of 1 November, the equivalent female rate is £8,178.48. Also in the top 10 is Scottish Equitable, which pays £8,613 as a level annuity to a man aged 65 on a single life basis while for the female equivalent, Friends Provident pays £7,945.56.
Peter Quinton, managing director of the Annuity Bureau, said long gilt yields are at their lowest level for many years, reaching 4.38% on 12 November. He added: 'The trend for annuity rates has been down and gilt yields are at their lowest for a long time. Companies which have recently cut their annuity rates include Standard Life, Legal & General, Friends Provident and Prudential.'
He added that those entitled to enhanced annuity rates such as smokers could get around 3% more on their annuity and those suffering a terminal illness such as cancer can get their annuity rates enhanced by around 100%.
For RPI escalating annuity rates Prudential also offers the best rates for men aged 65 on a single life basis, paying £6,685.08, for a £100,000 purchase price. Also in the top 10 are Standard Life, Canada Life and GE Life. For women, Norwich Union is paying the best rate at £6,021, with Axa Sun Life, NPI and Scottish Amicable also featuring in the top 10.
For joint life annuities with both partners aged 65 and a purchase price of £100,000, Prudential is offering the best level rates, paying £8,010.24, with Standard Life, Scottish Equitable and NPI in the top 10. For premiums that escalate with RPI, Prudential is offering the best rates for joint lives with both partners aged 65, paying a rate of £5,844.48.
Quinton added that the FSA's consultation period on possible reform of the open market option regime has ended and the regulator is now looking at ways of expanding the use people make of shopping around for annuities. According to the Consumer's Association, only 25% of people shop around when buying their annuity.
Quinton expects competition to increase in the annuities market, with the rising number of pensions assets.
He also added that the Government is looking at what it needs to do with the annuities regime in terms of reform and pointed out that the annuity purchase market is around £5.7bn in size while the income drawdown market is around £2.4bn in size.
Paul Bruns and Elaine Parkes
3,000 left to transfer
Record numbers of people aged 90 plus
From 3 to 10 October