Annuity rates stabilise ahead of Budget

Annuity rates held firm in June ahead of the Emergency Budget, following several months of falling prices.

The best level annuity rate from Saga of £6,180 was unchanged from May, the Alexander Forbes Annuity Bureau says.

The majority of providers held their rates for the month with only Aviva and Aegon easing slightly.

Retail Price Index (RPI) linked rates were also steady in June, with the top price from Canada Life of £3,586 unchanged on the month, according to Alexander Forbes.

Rates have eased for the year to date however, to be down 5% - losing retirees around £180 annual income for every £100,000 saved.

Smokers' rates have been more consistent in 2010, with the best smokers' rate of £7,023 from Reliance Mutual unchanged for the month.

It is also the same rate available from Reliance in January 2010.

Alexander Forbes Annuity Bureau director Tim Whiting says: "The Annuity market seems to have taken a breather in June.

"Markets are probably waiting to see how tough the new Chancellor, George Osborne, is going to be on the public sector deficit in the emergency Budget on 22 June.

"Overall demographic pressures mean the long term trend for annuities will inevitably continue to be downwards and people must make strenuous efforts to build up the largest possible pension pot before reaching retirement age."

He expects the reaction of the gilt market to the Budget and any changes in the outlook for interest rates to reveal more about whether annuities will continue their downward trend for 2010, or start to recover slighty.