IFAs anticipate further annuity rate drop

Over 80% of IFAs have predicted annuity rates will drop over the next five years, according to a survey from MGM Advantage.

The research found one in four IFAs expect rates to decline by between 7.5% and 10% by 2015, and one in five think the drop will be over 10%.

"There is a lot of pressure on annuity rates at the moment, including increased life expectancy and Solvency II, which will require insurers to keep back more capital," says Aston Goodey, sales and marketing director at MGM Advantage.

"If rates do fall, conventional annuities will become less attractive and a greater focus will be placed on asset-backed annuities," he adds.

The survey found 91% of IFAs expect the asset-backed annuity market to grow over the next five years, with a third saying it will grow by 10%-20% and almost 40% believing it will expand by 20%-100%.