28 September 2012 last updated

Smoker annuity rates decrease by 2% across the board

Smoker annuity rates have been decreased by leading providers with annuities lower by up to 2.0% for males, females and joint lives. Annuity providers have reduced smoker rates across the board following last weeks decreases from the standard annuity providers. Decreases have been made by Liverpool Victoria of about 1.6% and Reliance Mutual by about 2%. Even though gilt yields have increased this month the providers have continued to reduce their rates suggesting they may be taking into account the new Unisex Rates soon to be introduced by the EU Gender Directive from 21 December 2012. Annuities are mainly based on the movement of the 15-year gilt yields and this month the yield at 2.16% is 9 basis points higher suggesting annuity rates could increase by 0.9%. Instead annuities have reduced across the board with no signs of improving.

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Smoker annuity rates now 8% lower

In the last six months smoker annuity rates have decreased by 8.6% across the market including males, female and joint lives on a level and escalating basis. This compares to gilt yields that have reduced by 56 basis points over the same period and would suggest we should see annuity rates fall by only 5.6%. However, it does seem unlikely that rates will increase by 3.0% to re balance this difference as the EU Gender Directive approaches.

The Unisex Rates will mean males rates reducing by about 3.6% on average for level rates although this could be as high as 4.7% for escalating rates as the differences between males and females is larger. For females their rates may increase slightly by up to 2.6%.

The largest decreases have been for Males and females aged 55 with falls of 2.0% across the board. High falls were for females between the age of 60 and 75 with decreases of 1.25% to 1.87% and for 100% joint lives with falls of 1.64% to 2.0%.

Over six months smoker annuity rates have reduced by 8.6% compared to standard annuities with only 6.8%. For smokers out of all male, female and joint life rates, joint life pensioners are worse off with falls of 9.3%, females lower by 8.6% and males only 7.9%.