Pensions  

FTSE partners for annuity index launch

FTSE partners for annuity index launch

The FTSE Group, in association with Legal and General Investment Management and The Annuity Exchange, has launched an annuity index.

The FTSE UK Level Annuity Index Series is designed to allow users to compare changes in the value of a pre-retirement fund with changes in annuity prices.

The index series will be calculated daily, using the average of the three highest annuity rates for different retirement profiles: early, standard and late.

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The suite of products will also include the FTSE UK Level Adjusted Annuity Indices, which measure the performance of annuity prices adjusted for the effect of anticipated interest rate movements.

Peter Gunthorp, managing director for research and analytics at FTSE, said the tool will be vital for defined contribution scheme savers attempting to meet their retirement objectives.

“With automatic enrolment on track to create nine million new UK DC savers by 2018, we believe products of this nature will continue to grow in demand.”

Aaron Meder, head of investment at LGIM, added: “The launch of the annuity index series represents a significant step forward, providing an independent, objective and transparent way of measuring the success of all pre-retirement strategies against the real-world outcomes investors care most about.”

MGM Advantage’s latest annuity price index showed rates fell again last autumn by 2.4 per cent and will now pay more than £2,000 less over the course of a retirement than at the time of the Budget last March.

Following the chancellor’s announcement of annuity market reform and increased flexibility for retirees, analysts predicted that the value of new individual annuity business would shrink from £12bn a year to £4bn by 2015.

peter.walker@ft.com