Further falls in annuity rates
The latest findings from the MGM Advantage Annuity Index, which tracks the income paid on enhanced and conventional annuities on a quarterly basis, reveals that in the three months between June 2010 and September 2010 the average conventional rate fell by 3.65%.
Since June last year, the average conventional rate has fallen a staggering 6.98%.
The average rate on standard and enhanced annuities fell by 3.65% and 3.04% respectively between June and September this year, and the corresponding figures since June 2009 are 6.98% and 5.32%.
Craig Fazzini-Jones, Director at MGM Advantage comments, "Our findings show the importance of shopping around for the best possible deal when buying an annuity, but sadly only around one in three people are moving providers for the best income. For the average person buying an annuity, they could be thousands of pounds worse off during their retirement if they don't shop around for the best deal."
"The results also show the significant increase in income that an enhanced annuity can provide but not enough people are declaring the health conditions that could allow them to qualify for up to 20% more income each year," said Craig.
The Index also reveals that the gulf between the income paid on top and bottom quartile annuities is continuing to grow. Looking at the market as a whole, in June 2010, the average difference for men was 35.60% compared to 36.83% in September. The corresponding figures for women are 34.70% and 37.22%.
Over the last three months, the difference between an average standard annuity and an average enhanced annuity was 23.94%. Over the average retirement, this amounts to £12,490.58 for men and a massive £14,101.80 for women on a pension pot of £50,000.
Between June and September 2010, the difference between the top and bottom rates paid by enhanced annuities for men was 19.37%, up from 16.78% between March and June 2010. For women, the difference decreased 1.68% to 15.33% from 17.01%.
Craig Fazzini-Jones, Director at MGM Advantage comments, "The gulf between the best and worst annuity rates for conventional and enhanced products is becoming wider, and with rates in general falling it's more important than ever to consider alternative retirement income solutions that can really make the most of people's retirement savings.
"Earlier this year, we launched a new and unique asset backed annuity - the Flexible Income Annuity, which offers the potential for investment growth to provide an income that can combat the effects of inflation and that comes with a minimum income guarantee for peace of mind. One of the problems with level conventional annuities is that income is fixed for life and falling rates means this income is shrinking all the time."