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Eurozone crisis 'key to annuity rates'

13 June 2012

The ongoing eurozone crisis is continuing to have an impact on annuity rates in the UK.

According to a report by Scotland on Sunday, the rates are likely to carry on falling until the economic situation across the continent is looking improved.

Carl Melvin, director of Affluent Financial Planning in Paisley, told the news provider that he believes recovery in the UK could still be some way off.

Earlier in the year, data from the Office for National Statistics revealed that the country is back in recession after it experienced back-to-back periods of negative growth.

Gilt impact

"Gilt yields are likely to fall further on the basis that the euro crisis will get worse, investors will seek a safe haven in sterling government debt and there will be greater demand for UK gilts. That means gilt values rising, yields falling and annuities are negatively impacted," Mr Melvin was quoted as saying by the newspaper, which could lead to some people taking financial advice to see if they would be better waiting for a while before purchasing an annuity.

Tom McPhail at Hargreaves Lansdown stated it could be "advantageous" to wait for annuity rates to increase in the coming months, but this may be a risky strategy.

Brian Steeples, managing director of the Turris Partnership in Glasgow, explained one of the newer products on the market at the present time - temporary annuities - are a good idea in theory, but the rates are too low for them to be an appealing choice for consumers.

Other options

He told individuals planning their retirement that they should steer clear of conventional annuity rates due to the low levels of interest they are paying and instead consider opting for options such as with-profits annuities, which may pay more over time.

In a recent interview with the Daily Express, Mr McPhail stated annuity purchases remain a popular choice among those coming up to their retirement age due to the flexibility they can offer when compared to some of the other products on the market.

Using the annuities service from Key Retirement Solutions could help older people to come to a decision about their financial future.