Boost for Income Choice Annuity payouts

At a time when rates on conventional annuities have been falling, Prudential's innovative Income Choice Annuity is bucking the trend and starting incomes have been increased by 1.5 per cent.

Prudential has passed on a fall in guarantee costs for the product which offers a secure minimum income for life as well as giving customers the opportunity to benefit from potential growth.

The new pricing applies to quotes issued from 11 October and to all new business where funds have been received from 11 October.

Prudential was able to increase starting costs after a calming of market volatility and a review of risk-free rates meant the cost of providing guarantees behind the Income Choice Annuity had fallen.

More than 12,000 customers have bought Prudential's Income Choice Annuity since it was launched in March 2009.  This innovative annuity gives customers the flexibility to select the level of income they wish to receive, and customers starting their annuity between 6 April 2009 and 5 April 2010 will have seen their income grow by up to 6 per cent at their policy anniversary.

Vince Smith-Hughes, head of pensions development at Prudential, said: "The cost of providing the guarantees underpinning our Income Choice Annuity has fallen so we are able to pass that on to customers.

"The Income Choice Annuity has proven to be very popular with clients and advisers since launch and we are committed to ensuring it remains as competitive as possible in the current market."

The Income Choice Annuity is available to customers with £10,000 after tax-free cash has been taken and is backed by Prudential's with-profits funds, one of the strongest funds in the UK, with around £70 billion invested.