Skip to main content
The Actuary: The magazine of the Institute and Faculty of Actuaries - return to the homepage Logo of The Actuary website
  • Search
  • Visit The Actuary Magazine on Facebook
  • Visit The Actuary Magazine on LinkedIn
  • Visit @TheActuaryMag on Twitter
Visit the website of the Institute and Faculty of Actuaries Logo of the Institute and Faculty of Actuaries

Main navigation

  • News
  • Features
    • General Features
    • Interviews
    • Students
    • Opinion
  • Topics
  • Knowledge
    • Business Skills
    • Careers
    • Events
    • Predictions by The Actuary
    • Whitepapers
  • Jobs
  • IFoA
    • CEO Comment
    • IFoA News
    • People & Social News
    • President Comment
  • Archive

Topics

  • Data Science
  • Investment
  • Risk & ERM
  • Pensions
  • Environment
  • Soft skills
  • General Insurance
  • Regulation Standards
  • Health care
  • Technology
  • Reinsurance
  • Global
  • Life insurance
Quick links:
  • Home
  • The Actuary Issues
  • April 2014
04

Little change in annuity rates, say MGM

Open-access content 15th April 2014

Average annuity rates increased by less than 1% in the first quarter of the year driven by static gilt yields and flat returns on corporate bonds, according to figures compiled by pension specialists MGM Advantage

The firm told The Actuary that the rates were examined before the March Budget, but since then prices had not changed much, increasing by only 0.83%. 

The firm said that retirees aged 65 who purchased a standard annuity with a £50,000 pension pot received an average annual income of £2,874, while an enhanced annuity produced an average income of £3,470. 

Its data revealed two distinct markets, with a 30% difference between the top enhanced rates and bottom standard rates. The gaps between rates also show a two-tier market, with the difference between the best and worst enhanced rates at 7%, compared to 12% in the standard market. 

'Following the strong rise in annuity rates throughout last year, rates were flat in the first quarter of 2014. This is in part due to gilt yields, as well as the returns available on corporate bonds,' said Aston Goodey, MGM's sales and marketing director. 

'Given the uncertainty in the market at present, it is worth remembering that customers who are looking to secure a sustainable income for life face the same decisions as they did before the Budget, and are unlikely to get a different outcome now to post [April] 2015 [when the Budget's pension reforms are implemented]. The cost delay needs to be considered, as does the potential for annuity rates to go down in the future.'

Goodey added that the Budget proposals would have an impact on rates going forward, but said it was too early to call how this would play out. 

He said: 'We are already seeing reduced demand as some people are postponing decisions until April 2015. This could drive annuity rates down. However, the competitive open market providers are likely to compete even more aggressively for business which might lead to tactical pricing decisions and improved rates for enhances customers.'


This article appeared in our April 2014 issue of The Actuary.
Click here to view this issue
Filed in:
04
Topics:
Life insurance
Share
  • Twitter
  • Facebook
  • Linked in
  • Mail
  • Print

Latest Jobs

GI Model development contractor

£700 - £1000 per day
Reference
119012

Pricing Actuary - Marine, Credit, Aviation

London (Central)
Total package circa £230K
Reference
119011

Capital Modelling Actuary

London, England
£70000 - £100000 per annum
Reference
119010
See all jobs »
 
 
 
 

Sign up to our newsletter

News, jobs and updates

Sign up

Subscribe to The Actuary

Receive the print edition straight to your door

Subscribe
Spread-iPad-slantB-june.png
​
FOLLOW US
The Actuary on LinkedIn
@TheActuaryMag on Twitter
Facebook: The Actuary Magazine
CONTACT US
The Actuary
Tel: (+44) 020 7880 6200
​

IFoA

About IFoA
Become an actuary
IFoA Events
About membership

Information

Privacy Policy
Terms & Conditions
Cookie Policy
Think Green

Get in touch

Contact us
Advertise with us
Subscribe to The Actuary Magazine
Contribute

The Actuary Jobs

Actuarial job search
Pensions jobs
General insurance jobs
Solvency II jobs

© 2020 The Actuary. The Actuary is published on behalf of the Institute and Faculty of Actuaries by Redactive Publishing Limited, Level 5, 78 Chamber Street, London, E1 8BL. Tel: 020 7880 6200