Age-old pain as annuity rates slump

Retirees about to buy an annuity with their pension fund can expect to be worse off than if they had bought two months ago, and have little chance of securing a better rate later in the year, says the Annuity Bureau.

Annuity rates tend to mirror the income paid out by government bonds, or gilts, whose yield hit a two-year low last week. The result means that annual annuity payouts from Prudential, one of the bigger and more competitive providers, have fallen by about £90 a year since the middle of May for a 65-year-old male with a £100,000 pension fund. In the case of a joint life annuity for a man aged 65 and a woman aged 63 (again with a £100,000 fund), where 50 per cent benefit is payable to the wife on the death of her husband, the annual income from Prudential has fallen by £240 a year from £6,582 to £6,341. Similar reductions in rates have been applied by all the competitive annuity providers, said the bureau. The only providers to buck the trend were Norwich Union and Just Retirement.

'I expect annuity rates to remain relatively flat for the balance of the year,' said Quinton. 'My advice to anyone about to purchase their annuity is to go ahead now. Don't wait in the hope that there will be a dramatic upturn.'

Where the money is

Our sister title Money Observer magazine celebrates its 300th issue by publishing its Hot 300 Index. It includes top share tips for growth and income, a ranking of funds and trusts that consistently deliver strong performance, the 10 schemes offering the best tax breaks, and which savings and mortgage products offer consistently good rates.

Property junkies can find out about the hottest UK postcodes and wine connoisseurs can read about the best French vintages of the past 25 years for investment or indulgence.

Along with a supplement on how to make the most of investment trusts and a competition with £5,000 in shares up for grabs, the July issue could really improve your financial fortunes.

It's available in all good newsagents now, price £3.99. Or you can get your first three months of Money Observer free if you sign up for a subscription today. Call 0870 870 1324 or visit moneyobserver.com/subscribe. Reference MTGL001.

A new key to insurance

Text fanatics can insure their health, car and worldly goods through a service that claims to be the first of its kind offering insurance via mobile phone.

Text2Insure is initially offering travel insurance - from insurer Hastings Direct - via text messaging but has plans to branch out into other types of insurance. People wishing to use the service simply text INSURE to 61066 and will then be texted back asking for the number of days they need cover for, the destination, their age and whether the cover is for an individual or a family. Text2Insure says it will generate a response within 60 seconds, at which point customers have the option to text BUY with their name and departure date. The company's call centre will then telephone to arrange payment.

Also embracing technology is Swiftcover.com, which launched last week claiming to offer big savings on car insurance. The company says that while other insurers who call themselves online providers rely on call centres to deal with quotes and to handle the administration of those policies, it will save customers money by operating the whole process over the internet.