Investment returns and how long you live - have the most impact on annuity rate changes

Article date: 26 November 2013

Aviva Managing Director of At Retirement, Clive Bolton, speaking today at the Westminster and City’s Seventeenth Annual Conference on Annuities and Drawdown has outlined how enhanced annuity rates and regulatory change have had less impact on rate changes than investment yields and adjustments due to longevity.

The graph above shows:

  • The change in long-term interest rates accounts for almost all of the change in annuity rates over the last 20 years.
  • Around the turn of the century the industry increased its view of the potential improvements in mortality.
  • The early 1990s were a remarkable period of exceptionally high real yields which were good for annuity rates and savers, but bad for mortgage payers.
  • Since then the situation has gradually reversed (including two stock market crashes) to a low yield economy which is much better for mortgage payers than savings and annuity rates.

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