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What a year for annuities!

  • Canada Life average benchmark annuity rates1 up by 44% since January 2022, having reached a 14-year high in October

  • Canada Life annuity quote volumes increase by 58%1

  • A 30-year guarantee would now pay £59,940 additional income (on a £100,000 initial purchase price) compared to rates at the beginning of the year

Nick Flynn, Retirement Income Director, Canada Life, comments:

“Annuities have made quite a comeback this year, with guaranteed lifetime income back in vogue following the strong improvement in rates. This has largely been driven by the positive shift in yields available on gilts, while competitors have also vied for market position.

“Annuities can play a vital role in any holistic retirement plan and yet many preconceptions continue to reinforce the misunderstanding around annuities. From the positives of longer guarantee periods, to 100% value protection, or the benefits of disclosure providing enhanced rates, annuities are worth more than a cursory second glance.”

A look at how annuity rates have performed in 2022

A look at how annuity rates have performed in 2022

Source: Canada Life benchmark annuity rates as at 30/11/2022. £100,000 purchase price, healthy single life with 10-year guarantee. Reference 15-year Gilt yields taken from FT.com

The value of income guarantees

The value of income guarantees

Source: Canada Life benchmark annuity rates from 02/01/2022 and 30/11/2022, showing the guaranteed element of the annuity as total income. £100,000 purchase price, healthy single life with 10-year, 20-year and 30-year guarantees.

Nick Flynn concludes:

“For clients seeking income security in retirement, annuities can play a key role in retirement planning. It will always pay to shop around for not only the best rate, but also the right shape and type of annuity. Purchasing an annuity is a significant financial step and it is the role of advisers to help their clients understand the choices available and select the right annuity for a customers’ individual needs.”

Some pros and cons of buying an annuity

Pros

  • 100% secure lifetime income, not linked to the stock market
  • Your health and lifestyle could significantly improve the rate you are offered, so always disclose these to your adviser, annuity broker or annuity provider
  • You can combine annuities and drawdown, it doesn’t need be an ‘either / or’ decision

Cons

  • If you die ‘early’, your estate may not get your money back, unless you have the right protection in place
  • Your income will be fixed and offer no flexibility, unless you opt for some form of inflation linked escalation which can be expensive
  • Don’t accept the offer from your existing pension company, always shop around the open market for the best shape and rate

 

ENDS

Notes to editors

  1. Sources: Canada Life benchmark annuity rates as at 02/01/2022 and 30/11/2022, alongside internal management information.

Enquiries:

Press enquiries should be directed to:

Paul Keeble, Canada Life, 07833 085387, Paul.Keeble@canadalife.co.uk

About Canada Life:

Canada Life is part of a group of companies controlled by Great-West Lifeco Inc., a diversified financial services holding company headquartered in Winnipeg, Canada. Through its subsidiary companies, Lifeco has operations in Canada, the United States, and Europe. Great-West Lifeco and its insurance subsidiaries have received strong ratings from major rating agencies.  Great-West Lifeco has over 30 million customers worldwide and £1.341 trillion assets under administration (as at 31.12.21).

Canada Life Limited began operations in the United Kingdom in 1903 and looks after the retirement, investment and protection needs of individuals and companies alike. As well as providing stability and security through its individual contracts, Canada Life Limited has grown to become the leading provider of competitively priced group insurance solutions.

Canada Life Limited is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. Registered in England and Wales no. 973271. Registered office: Canada Life Place, Potters Bar, Hertfordshire EN6 5BA. Canada Life Platform Limited, trading as Canada Life, is a subsidiary of The Canada Life Group (UK) Limited, and is authorised and regulated by the Financial Conduct Authority. Registered in England and Wales no. 8395855. Registered office: Canada Life Place, Potters Bar, Hertfordshire EN6 5BA.

www.canadalife.co.uk