Annuity rates rise after decade of decline

By Jennifer Hill

LONDON (Reuters) - Annuity rates have risen at their strongest rate in a decade but the outlook now is less certain, new figures show.

Average annuity rates increased by more than 6 percent last year following a prolonged erosion of the buying power of pension pots, according to Investment Life and Pensions Moneyfacts.

A typical male received an annuity rate of 622 pounds per 10,000 pounds of retirement savings in December 2007, up 6.32 percent on the year.

The average female received 582 pounds per year in retirement income per 10,000 pounds, up 6.4 percent.

The figures are based on an annuitant aged 60 buying a standard level without guarantee annuity.

The upturn follows a decade of falling rates, which have dropped by 29.56 percent for men and 27.34 percent for women over the past 10 years.

"The increase in annuity rates over 2007 gives a significant boost to a market that has suffered substantial reductions in rates amounting to 30 percent over the previous decade," said Suzanne Greener, deputy editor of Investment Life & Pensions Moneyfacts.

Rates have, however, dropped over recent weeks and the outlook for those set to retire in the future is less certain, as inflation and recession threaten to hamper long-dated investments that drive annuities and the buying power of annuities already in payment.