There was a 5.019% drop in the top enhanced annuity rate during the last twelve months, according to a new study.

The research by My Pension Expert focused on a 64 year-old with a pension pot of £100,000 that qualified for an enhanced rate as result of smoking ten cigarettes daily, consuming 52 units of alcohol weekly and possessing high blood pressure.
On the 24 September 2013 they would have been able to receive a top rate of £7,332, compared to 30 of September 2014 when the best rate available was £6,964.
When factoring in an average 20 year retirement this amount becomes £7,360.

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Scott Mullen, director at My Pension Expert, said this amount could make a "massive difference" and added there were two major factors behind the decline. First was the significant reduction in the 15-year gilt yields, which he said have a considerable influence on annuity rates.

Having recently dropped to a fourteen month low of 2.83%, he said yields have been on the slide since the turn of the year and as a result annuity rates have fallen with them.
The second factor was the Budget reforms, creating a reduction in the demand for annuities. This fall in the amount of annuities sold has led to providers decreasing their rates in an attempt to cut their losses, Mr Mullen said.
The Budget changes have particularly seen demand for enhanced annuities drop for those who are in poor health, according to the study.
It found many decided to refrain from buying an annuity, which they may not live long enough to see a return from and are instead exploring other avenues that the freedoms have opened up.
Mr Mullen said this explained why there was only a marginal 0.292% difference between the top standard annuity on 24 September 2013 and 30 September 2014, compared to the enhanced drop.
Mr Mullen said: "A fall in enhanced annuity rates is to be expected given the factors that are in play at the moment.
"Rates are more volatile than ever as the current market remains on shifting sands until the new pension freedoms are introduced next April.
"These are testing times for those approaching retirement and taking advice when evaluating your options is essential.
"It's one of the important financial decisions a person will make in their lifetime and the right advice can make a massive difference when negotiating the pension minefield towards a happy retirement."

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