Annuity rates have rebounded to beat the highs seen in December last year after faltering slightly during Q1 2008, according to Investment Life & Pensions Moneyfacts.
The comparison and information site's annuity market review, carried out in December 2007, revealed that despite plunging returns of up to 30% during the previous decade, average annuity rates had improved by 6% during 2007 taking rates to their highest level in five years.
Annuity rates are currently ahead of this recent high and the number of rate changes during the past few weeks suggests providers are keen to pass improvements onto customers in a competitive market, Moneyfacts suggests.
The average male annuity rate was £629 in May 2008 (for a gross annual annuity based on an annuitant aged 60 buying a standard 'level without guarantee' annuity for a purchase price of £10k). This compared to £622 in December 2007 and £585 in December 2006.
Using the same criteria, the average female annuity rate was £588 in May 2008 compared to £582 in December 2007 and £547 in December 2006.
However, although annuity rates have recently enjoyed a period of relative growth and stability compared with the previous decade customers can still get caught out if they fail to do their homework, Moneyfacts warns.
The difference between the best and worst standard rates on offer can vary by as much as 20% and enhancements available due to ill health can significantly increase the income payable.
Suzanne Greener, deputy editor of Investment Life & Pensions Moneyfacts, comments: "Although rates are at their highest level for some time, continued uncertainty in the economic environment means that there is no guarantee that rates will remain at this level.”
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