Standard Life has cut its annuity rates by around 4 per cent, following a dramatic post-Brexit decline in gilt yields.
On Monday, UK 10 year gilt yields dropped below 1 per cent for the first time ever, after Standard & Poors stripped the UK of its prized AAA credit rating.
A spokesperson for Standard Life confirmed today (30 June) that it had cut annuity rates by “around 4 per cent”.
The life company added: “The decision was made primarily in response to the fall in yields experienced over the last few days. We continue to monitor the situation very closely.”
In cutting rates, Standard Life was following in the footseps of Legal & General, which cut its annuity rates by around 2 per cent on Wednesday.
Susan Hill, a chartered financial planner at Susan Hill Financial Planning, said it was a shame that providers were rushing into cutting annuity rates, when some parts of the market - particularly equities - appeared to have recovered after the shock of the UK’s decision to leave the EU.
She said the low annuity rates meant now was not a good time to annuitise.
“I would just hold off making the decision until a later date, and take the opportunity to grow your fund,” stated Ms Hill, adding pension freedoms gave people more options in such a low-rate environment, and very few of her clients were opting to annuitise.
However, she said these other options did not amount simply to going overweight equities. “I believe in asset allocation and there are other instruments that are an alternative to gilts, such as corporate bonds.”
james.fernyhough@ft.com
