Best and worst: Personal Pension Annuity Rates

PEOPLE who buy an annuity at retirement from the same company they bought their personal pension from are often making a mistake.

The amount of income people buy with the lump sum at retirement is based on a combination of factors, including life expectancy rates and returns from gilts.

The Annuity Bureau, a London firm of advisers specialising in this field, looked at annuity rates in schemes where the surviving spouse continues to receive a non-escalating pension.

Tony Solomon, market manager at Eagle Star, which paid the lowest income, said: 'In the early 1990s we were big players in the annuity market and contributed a lot of figures to central mortality investigations.

'What we have learned is that people are living far longer than before. We believe that other companies are using the wrong mortality tables. We have therefore effectively withdrawn from the market, as these figures show.'

Mr Solomon added that his company's sales staff were not allowed to sell annuities and that Eagle Star actively encouraged its personal pension clients to go elsewhere for their annuities.

Legal & General, which is the second worst annuity provider, said: 'We are not players in the market and would not be expecting to compete with the top rates.'

A similar answer came from Axa Equity & Law. Nevertheless, the company increased its annuity rates last Monday, raising its income payout from pounds 4,071.96 to pounds 4,351. This lifted it from bottom third place to midway up the table.

------------------------------------------------------------------------ PERSONAL PENSION ANNUITY RATES ------------------------------------------------------------------------ The best pounds 1 Equitable Life 4,716.48 2 Norwich Union 4,633.56 3 Sun Life 4,613.88 4 Prudential 4,610.16 5 Canada Life 4,581.60 The worst 96 NPI 4,230.00 97 Sun Alliance 4,155.00 98 Axa Equity & Law 4,351.00 99 Legal & General 3,927.20 100 Eagle Star 3,673.56 ------------------------------------------------------------------------ Figures are for a pounds 50,000 personal pension annuity, joint life, male 65, female 60, paid monthly in advance, as at 27 July 1994. ------------------------------------------------------------------------ Source: The Annuity Bureau 071-620 4090 ------------------------------------------------------------------------