Rates range as gilts lag: Best and worst: Annuities

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INVESTORS who shop around when their personal pensions mature may find that the annual annuity rate they are offered can vary by as much as pounds 1,300 - a difference in income for a pensioner of more than pounds 100 a month.

Annuity rates depend on the income offered by the gilt market. Peter Quinton, managing director of the Annuity Bureau, said gilts rates are continuing to fall, and last week's cut in interest rates could bring annuity rates down further. The actual rate offered by the annuity provider depends on its investment strategy.

Both Commercial Union and Irish Life said their uncompetitive rates reflected the fact that they were not interested in marketing their annuities at this time. Dave Fagan, Irish Life's general manager (marketing), said his company was obliged to offer an Irish Life annuity to anyone who has a personal pension maturing with the office. But he said the vast majority of people chose to operate the open-market option and pick the annuity that offered the highest income.

Rates for women vary by slightly less, with the bottom rate offered by Scottish Life at pounds 6,777.72, and the top rate again offered by Equitable Life at pounds 7,872. Women get a lower rate because they live longer and their pension is spread over a longer term.

Equitable said it could offer an enhanced rate because its expenses ratio was low and it did not pay commissions on its products. General Accident said it was reviewing its annuity in light of the interest rate cuts and expected other companies to follow suit.

----------------------------------------------------------------- PERSONAL PENSION ANNUITIES ----------------------------------------------------------------- The best pounds per year 1 Equitable Life. . . . . . 8,893.56 2 General Accident. . . . . 8,717.04 3 Canada Life. . . . . . . 8,692.44 4 Merchant Investor. . . . 8,660.76 5 Laurentian Life. . . . . 8,660.00 The worst 16 Generali. . . . . . . . .8,300.76 17 Commercial Union. . . . .8,184.00 18 Providence Capitol. . . .7,986.24 19 Scottish Life. . . . . . 7,693.80 20 Irish Life. . . . . . . 7,554.00 Flat-rate income on an pounds 80,000 annuity for a 65-year-old man, payable monthly, with a five-year guarantee. ----------------------------------------------------------------- Source: The Annuity Bureau 22 November 1993 -----------------------------------------------------------------