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Falling interest rates mean returns are slipping away from people who rely on conservative investments.

Returns from guaranteed investment certificates have been edging lower and so have payouts from annuities. A 65-year-old male who 12 months ago put $250,000 into an annuity with payouts guaranteed for 10 years would have received $15,602 per year, says Rino Racanelli, an insurance adviser who specializes in annuities. Mr. Racanelli ran the same quote earlier this week and came up with a best payout of $14,893, which is $709 less per year.

The backdrop here is a decline in bond yields caused by concern about a slowing global economy. The yield on the five-year Government of Canada bond has gone from 2.5 per cent last November to as low as 1.4 per cent in late March. “If we keep seeing bond yields falling, then I would expect to see lower [annuity] payouts,” Mr. Racanelli said in an e-mail.

Don’t panic if you’ve been considering an annuity and haven’t made up your mind. Rates have a big influence on annuity payouts, but so do your age, the type of annuity being purchased and technical factors related to how well an insurer’s annuity business is performing. The upshot here is that lower bond yields will bring annuity payouts down, but not cause them to plunge.

Annuities are a big decision – they provide cash for life, but you can’t sell or redeem in the years after you buy. If you’re waffling, one solution might be to ladder your annuities just as you would a portfolio of GICs. For example, you could buy a series of annuities over the next five years in the hope that rates would rise above today’s levels. It’s also worth noting that buying an annuity at a later age means a higher payout. The RBC Insurance annuity calculator shows a 65-year-old male would get $15,610.36 by purchasing a $250,000 annuity today, while a 70-year-old would get $17,710.56.

Whether you’re buying GICs or annuities, it’s important to understand that the interest rate trend is no longer your friend. As late as last fall, it looked like rates were going to keep grinding higher. Now, the question is how low rates can go.