Annuity rates have continued to slide despite experts predicting a rise in the second half of this year.

After George Osborne’s budget cuts were announced in June many expected rates to creep up because interest rates paid by the UK Government on its borrowings were expected to increase.

But now financial markets say that the Emergency Budget may have had the opposite effect on annuity rates, keeping them low, and a rate rise is unlikely until well into 2011.

Speaking to Money Marketing The Retirement Partnership managing director Steve Lewis said: “All the evidence continues to point to increases in life expectancy. This steadily erodes the level of annuity income payable from pension savings as the income is expected to be paid for longer.

“A second problem for the insurance companies when setting annuity rates is that new accounting rules are being introduced for the whole of Europe’s insurance industry. This means that providing annuities will cost the insurance companies more and they will therefore pay less.”

He also says that whilst there is so much ‘economic and financial uncertainty’ annuity rates are likely to remain low for the short term, at least 6 to 9 months.

But it’s not all doom and gloom for annuities Fair Investment Company has launched a new annuity service to show people how much more they could get for their pension fund by shopping around and how easy comparing annuity rates can be.

The service reminds people that having a health condition could entitle them to extra retirement income.

George Ladds, head of investment and pension research at Fair Investment Company said: “Unlike with life assurance, where poor health usually means higher premiums, the opposite is true with annuities – poor health, and consequently decreased life expectancy means higher annuity rates, but many people don’t realise how much more they could get by shopping around on a standard annuity, let alone if they have health issues.”

Click here to compare annuity rates »

© Fair Investment Company Ltd