NU hits top spot in annuity rate table

Norwich Union has improved its level rate by £140 to £7,150 since June last year for a man aged 60, with level escalation making a £100,000 annuity purchase.

The change has resulted in Norwich Union stealing the number one slot from Aegon Scottish Equitable, which saw its rate improve by £116 to £7,144 in the year.

The data also showed a glimmer of light in the RPI market with both Prudential and Norwich Union marginally improving their income for men retiring at age 60.

However, Legal & General (L&G) remained top of the table with its rate unchanged at £4,065 for level escalation and a £100,000 annuity purchase.

Prudential, however, grabbed the top spot for women's inflation-linked annuities with an improvement of £42 to £3,717 in the year, pushing L&G into second place.

Smokers also saw a rise in annuity rates, benefiting from greater competition and higher interest rates.

LV= pipped Reliance Mutual to the top slot for single lives with a rate of £7,998 (male 60, smoker, level escalation, £100,000 annuity purchase).

But Reliance Mutual remains the best choice for joint lives at £7,167 (male 60, female 57, smokers, level escalation, £100k purchase).

David Marlow, director of Alexander Forbes Annuity Bureau, said: "Where rates go from here is dependent on future interest rate movements.

"While the headline figures continue to rise we’re also beginning to see some providers shave some rates. This could be because they have secured sufficient business, competition was beginning to hurt, a change in required business mix or possibly because they are starting to think about the next move in interest rates.

"We're also seeing interesting developments in the smokers market, not only are rates rising, but we’re also seeing a serious attempt to eliminate fraud with newcomer Partnership Assurance insisting on urine tests to prove how much annuity applicants smoke.

"There is every chance that this approach will become the norm, as providers try to price their rates as accurately as possible."