Annuity rates for smokers shot up by 6.28% last month, according to latest figures from the Annuity Bureaus January table
Smokers aged 60 seeking to turn a pot of pension savings into an income for the rest of their retirement and buy a single-life annuity can expect to get £6,584.00 a-year from Scottish Widows with a £100,000 purchase. The hike reflects the firms December rate increase, which lifted it from fourth to second place in the bureau's monthly table.
Legal and General topped the table for smokers paying £6,681.60, almost £100 per year more than Scottish Widows.
Scottish Widows also increased its smoker rates for joint-life annuities making it the top-paying provider at £5,932.80 for men aged 60 and women aged 57, while Just Retirement took the top spot for at £6,532.44 for men aged 65 and women aged 63.
The Annuity Bureau noted some big changes at the lower end of the table with Reliance Mutual and LV= increasing their rates by 3.07% and 2.41% respectively.
Non-smokers could receive £5,645.40 based on a standard level annuity rate for a single-life at age 60 for men and 57 for women from Legal and General, compared to Prudential who offered only £4,594.68 a year.
For a joint-life annuity, Legal and General could only offer an income of £5,209.80. Canada Life rates remained unchanged for joint-life at £5,024.28.
When it came to standard RPI-linked annuity rates, Legal and General led the way, again, for single-life annuities with an income of £3,054.00 at age 60. Canada Life was at the bottom of the table, in fourth place, paying out only £2,746.68. This was a similar picture to joint-life RPI linked annuities with Legal and General slightly lowering its rates by 0.03%, while Aviva increased its rate by 0.7%. Canada Life made the biggest increase (1.56%) but did not move from fourth place.
James Auty, managing director at the bureau, said 2014 was set to be a big year for the annuity market, with some much needed attention from the regulators and pensions minister Steve Webb.
'Fundamental to their concerns is the continual lack of knowledge around how the retiring public can get the best income from the pension pots that they have accumulated during their working lives,' he said.
'There can only be one "top rate" for each individual so, when approaching retirement, it is imperative to shop around and use the open market option to find "your" top rate; which invariably is not going to be the provider you have historically saved with.'