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15 November 2012 last updated
Impaired annuity providers reduce rates by 2% ahead of EU Gender Directive

Providers have reduced impaired annuity rates in line with decreases earlier this month as the market actively lowers annuities before the EU Gender Directive is active from 21 December 2012.

Liverpool Victoria has reduced their impaired annuity rates by 2% following decreases from Partnership assurance and Just retirement earlier this month and continues the trend of the downward cycle in annuities.

With the EU Gender Directive approaching fast providers have been actively reducing rates to ensure they have extra margin available with the new unisex rates.

Annuities are likely to be extremely volatile in 2013 with rates moving up and down as providers find the market balance for all the different ages and features selected by pensioners at retirement. This may mean that it will be difficult to secure the annuity rate when taking benefits.

Impaired annuity rates lower
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Volatility expected before annuity rates settle

The annuity market can be very dynamic and behind the scenes divided into hundreds of smaller markets where providers can specialise and offer leading annuity rates based on their own internal underwriting history. This can be by combinations of age, fund size, features such as level or escalating or single and joint life annuities which can change over time.

A provider not offering the highest annuity rates for males aged 55 to 70 may dominate for males aged 71 to 75. Another provider that is at the bottom of the table for level pension annuity may be the market leader for RPI escalating annuities.

Unisex annuity rates will change the market structure as underwriters must take into account the discrepancies of offering a single rate for men and women. If they miscalculate and offer higher rates than they should it could result in unprofitable business in the future and this risk has been driving down annuity rates for the past few months.

Impaired annuities first to lower rates

Providers of impaired annuities are usually the first to lower their rates when gilt yields fall. Annuity rates are based on the 15-year gilt yields and the leading providers such as Just Retirement, Partnership Assurance and Liverpool victoria are usually quick to follow any downward trend.

The 2% fall in impaired annuities from Liverpool Victoria means that a male aged 65 with a fund of £100,000 and suffering from high blood pressure, Cholesterol, heart and diabetes medical conditions may receive £7,048 pa and this would be reduced by £140 pa to £6,908 pa. The good news is that if the quote was secured just before the decrease and the pensioner acts quickly, it is possible that their funds can be transferred before the quote expires as impaired providers always offer longer guaranteed periods for their quotes.

News related stories:
Impaired annuity rates have been reduced up to 2% as gilt yields fall
Standard annuity rates now 1.5% lower income for pensioners
Smoker annuity rates decrease by 2% across the board
Unisex annuity rates to reduce annuities for males and couples
Impaired annuity rates reduce over 2% by providers
Impaired annuities lead rates fall to all time low
Annuity Rates
  Age Single Joint  
  55 £4,273 £4,019  
  60 £4,695 £4,418  
  65 £5,361 £4,913  
  70 £6,172 £5,708  
£100,000 purchase, level rates, standard
Unisex rates and joint life basis
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