Personal pension annuity rates

What Investment, June, 2007

An annuity is a financial product that converts capital into income. You can buy one with any lump sum of money, or with accrued pension funds. Currently, for money purchase pension funds you must buy an annuity by the time you reach the age of 75. However, most people buy their pension annuity sooner than this, in order to provide income for when they retire.

Types of annuity

Standard annuities provide risk-free income and guarantee to pay a set level of income throughout your lifetime, no matter how long that turns out to be. Investment-linked annuities, on the other hand, offer growth potential and may outperform standard annuities, but income can go down as well as up.

With most annuities, you choose at the outset how you want to be paid and what optional benefits you wish to include: for example, you choose how frequently you want to receive income and whether to provide a continuing income to your partner following your own death.

Rates of income

Available rates of income vary according to the options you select, the date of purchase and your own circumstances; for example, higher rates of income are available to smokers.

Crucially, rates also vary between different providers. Even for the exact same annuity, the income difference between the best and worst can be 25 per cent--or even higher for some types of annuities.

Once you have bought an annuity, you cannot cancel it later or change the provider. You have one chance to secure the best possible income for the rest of your life. You owe it to yourself to get it right, so see the table opposite for examples of the latest annuity rates.

Reading the table

* Figures assume an annuity purchase price of 100,000 [pounds sterling]. The income levels shown are the gross annual incomes.

* All the data is based on payments being made monthly in arrears, with a minimum payment period of five years.

* The rates available from impaired life annuities depend on individual assessments of life expectancy, for which medical evidence is required. The rates shown apply to people who have recently suffered from cancer and are receiving chemotherapy.

* A company that is top of the tables for one set of benefits or age may be poor for a different set of benefits (e.g. an index-linked annuity) or a different age; you must shop around for the annuity that fits your own circumstances.

For further information including a copy of You and Your Annuity, a comprehensive guide to annuities and your options, contact the Annuity Bureau on 0845 602 6263.

Level: Single Life

Provider              Rank                        Income

Male 60
Scottish Equitable       1    6,486.00 [pounds sterling]
Canada Life              2    6,434.04 [pounds sterling]
Norwich Union            3    6,430.00 [pounds sterling]

Female 60
Scottish Equitable       1    6,165.00 [pounds sterling]
Norwich Union            2    6,150.00 [pounds sterling]
Canada Life              3    6,099.60 [pounds sterling]

Escalation: RPI, Single Life

Male 60
AXA Sun Life             1    5,613.00 [pounds sterling]
Prudential               2    3,964.32 [pounds sterling]
Standard Life            3    3,956.40 [pounds sterling]

Female 60
AXA Sun Life             1    5,283.00 [pounds sterling]
Prudential               2    3,652.20 [pounds sterling]
Legal & General          3    3,636.96 [pounds sterling]

Level: Joint Life

Male 60, Female 57
Scottish Equitable       1    5,994.72 [pounds sterling]
Norwich Union            2    5,980.00 [pounds sterling]
Canada Life              3    5,932.20 [pounds sterling]

Male 65, Female 62
Scottish Equitable       1    6,544.32 [pounds sterling]
Norwich Union            2    6,540.00 [pounds sterling]
Prudential               3    6,482.88 [pounds sterling]

Escalation: RPI, Joint Life

Male 60, Female 57
AXA Sun Life             1    5,605.00 [pounds sterling]
Prudential               2    3,514.92 [pounds sterling]
Legal & General          3    3,491.40 [pounds sterling]

Male 65, Female 62
AXA Sun Life             1    6,294.00 [pounds sterling]
Prudential               2    4,098.96 [pounds sterling]
Legal & General          3    4,061.28 [pounds sterling]

Impaired Life Annuity *: Single Life, No Escalation

Male 60
Tomorrow                 1    7,312.00 [pounds sterling]
Just Retirement          2    6,980.00 [pounds sterling]
Prudential               3    6,438.44 [pounds sterling]

Female 60
Tomorrow                 1    6,797.00 [pounds sterling]
Just Retirement          2    6,581.00 [pounds sterling]
Prudential               3    6,065.52 [pounds sterling]

Impaired Life Annuity *: Joint Life, No Escalation

Male 60, Female 57
Tomorrow                 1    6,358.00 [pounds sterling]
Just Retirement          2    6,064.00 [pounds sterling]
Prudential               3    5,638.92 [pounds sterling]

Male 65, Female 62
Tomorrow                 1    7,192.00 [pounds sterling]
Just Retirement          2    6,761.00 [pounds sterling]
Prudential               3    6,338.40 [pounds sterling]

* See Reading the table, left.

Source: The Annuity Bureau

www.annuity-bureau.co.uk

Rates as at 2/5/07