MSE News: Annuity rates 'hit all time low'

Eric_the_half_a_bee

jamesd wrote: »

The annuity rate is the percentage value of the pot that is payable as income. 3% of £100,000 or 5% of £100,000 is the same, regardless of what the £100,000 will buy today compared to ten years ago. Inflation is completely irrelevant to it, except when discussing alternative types of annuity like level or inflation linked.

Surely investors' expectations of future inflation will affect the nominal yield they demand from fixed term and fixed coupon government bonds? And through that affect bond yield-based level annuity rates?


If so, if expectations of future inflation are at a low point, it should be no surprise that level annuity rates are also at a low point.

jamesd

Yes, I agree that inflation expectations will have that implicit effect on the possible pricing. A different thing from inflation-adjusting the annuity itself, though.

zagfles

Eric_the_half_a_bee wrote: »

Surely investors' expectations of future inflation will affect the nominal yield they demand from fixed term and fixed coupon government bonds? And through that affect bond yield-based level annuity rates?


If so, if expectations of future inflation are at a low point, it should be no surprise that level annuity rates are also at a low point.

Then there should also be a narrowing between indexed linked annuity rates and level annuity rates. I don't see that happening...(or is it?)

Eric_the_half_a_bee

zagfles wrote: »

Then there should also be a narrowing between indexed linked annuity rates and level annuity rates. I don't see that happening...(or is it?)

I don't have the data but I would be very surprised if that was not happening.

Pincher

http://www.myretirementincome.co.uk/annuity-rate-graph/


"In November 1990, annuity rates were 15.64%,"


We must be due for a guaranteed 13% annuity scam. Something like "We use your pension pot to buy Greek debt at 10% face value, so we can achieve phenomenal income stream based on German bailout money."