Are annuity rates expected to rise in the future?
The expectation is that annuity rates will remain at their current levels or fall in the future. This is because of a number of economic factors. The rate of inflation in the UK is now under control between the range of 1.5% to 3.0% reducing the yields from investments and gilts which are purchased by the insurance companies to pay annuity income to annuitants. The UK Government uses the gilt market to raise money to increase public expenditure. It does this by offering attractive rates of interest, but currently this money is not required. The market expectation is that the UK will eventually joint the Euro. As the interest rates in Europe are lower than in the UK, this means that UK interest rates must fall to match that of Europe. Finally, in the past there was only a single annuities market where the early death of an annuitant resulted in a mortality profit for the other annuity holders. However, these annuitants are now selecting against the insurance companies by opting for an e
