Annuity rates fall in December; Further slump due in 2012

Annuity rates have fallen across the board for December as gilt yields have plunged to record lows.

Further decreases to annuity rates are predicted for next year, Alexander Forbes Annuity Bureau said.

As of 1 December, Aviva held the top male single life level annuity (age 60, £100,000 purchase) but had cut its rate from November by £130 to £5,590.

Though Legal & General (L&G) increased its rate by £64 to £5,420, coming in at second place, Hodge Life held its rate at £5,390, remaining at third place.

Canada Life cut its rate by £312 to £5,135, falling from second place to fourth in the league table.

Inflation-linked annuities were largely unchanged, with Aviva holding its male RPI rate at £3,150 and Standard Life holding its rate at £3,118 for a male aged 60 with £100,000 purchase.

Gemma Goodman, head of Alexander Forbes Annuity Bureau, said: "At least part of the price moves will be for purely commercial reasons, with providers either trying to increase their annuity books or reduce demand.

"They will also have been looking carefully at the ongoing crisis the eurozone and its impact on UK gilt rates, which can have a significant impact on underlying annuity rates.

"We will continue to see volatility in annuity rates as we enter 2012 but overall I expect the long term trend to remain downwards."