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7 April 2017 last updated
Annuity rates lower catching up with long term fall in gilt yields
15-year gilt yields chart
Based on figures for March 2017
Latest gilt yield chart
 

Annuity rates have reduced by about 2.0% across the board in March catching up with a fall in gilt yields of 39 basis points since reaching a high for the year on 26 January at 1.88%.

Standard rates:  
annuity rates up 1.62%
Enhanced rates:  
annuity rates up 2.65%
Gilt yields:  
annuity rates up 1 basis point



 
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Providers lower annuity rates in line with yields

The 15-year gilt yields decreased by only 1 basis points to 1.49% during the month increasing only after a hope the US would have a rate-hike and more positive economic news from the Eurozone.

Over the longer term yields are 13 basis points lower compared to the high for the year reached on 26 January of 1.88% with standard providers decreased rates by an average of -2.45% and we would expect in the medium term of three months rates may increase further by 1.15%.

For smoker and enhanced annuity providers decreased their rates by an average of -2.59% on average and in the short term rates may increase by 1.29%.

Fig 1 below shows the annuity rates changes for the whole market and the proportion that have either increased, decreased or or did not change. It also shows the range of the changes of the annuity rates over the last month:

Annuity Rates Changes
Increase No change Decrease
annuity rates decrease   17%
annuity rates no change   2%
annuity rates decrease   81%
Increases of:
up to 4.1%

  Decreases of:
up to 6.9%
  Fig 1: Annuity rate changes for the whole market


For the month of March 17% of annuity rates increased by up to 4.1% with 2% remaining unchanged and 81% decreasing by no more than 6.9%.

What happened to standard rates

Below shows a fund of £100,000 with the change in standard annuity rates for single and joint pensioners from age 55 to 75 with different annuity options such as level or escalating over 1 month compared to gilt yields:

Standard annuity 1 month changes
Fig 2: Change in standard rates last month compared to gilt yields


Standard annuities decreased by an average of -1.62% during the month. For those aged 75 buying a single life or joint life on a 3% escalating basis with decreases of up to -6.9%. The highest increase was for those aged 60 with 50% joint life and level rate increasing by 1.75%.

What happened to enhanced rates

Lifestyle smoker and enhanced annuities have decreased significantly across the board for all types of annuities and ages.

Enhanced annuity 1 month changes
Fig 3: Change in enhanced rates last month compared to gilt yields


For enhanced and smoker providers rates decreased by an average of -2.65% with a larger fall of -5.2% for those aged 60 to 70 buying single life, 3% escalating annuities. The highest increase was 4.19% for those aged 60 with 50% joint life and level rate.


For the latest updates see Annuity Rates Review.

Changes to the 15-year gilt yields

The yields change for the month was from 1.50% to 1.49% or 1 basis points. Fig 2 below shows the daily 15-year gilt yields and the increase or decrease from the previous day's close:



15-Year Gilt Yields - March 2017
Day Rate (%) Change (bp*)
1 1.54 +4
2 1.56 +2
3 1.55 -1
6 1.57 +2
7 1.55 -2
8 1.57 +1
9 1.58 +1
10 1.59 +1
13 1.61 +2
14 1.59 -2
15 1.58 -1
16 1.60 +2
17 1.60 0
20 1.59 -1
21 1.61 +2
22 1.53 -8
23 1.59 +6
24 1.55 -4
27 15.2 -3
28 1.54 +2
29 1.51 -3
30 1.47 -4
31 1.49 +2
  Table 1: Daily 15-year gilt yields and changes
* bp - basis points

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Annuity Rates
  Age Single Joint  
  55 £4,066 £3,782  
  60 £4,544 £4,240  
  65 £5,246 £4,794  
  70 £6,045 £5,433  
£100,000 purchase, level rates, standard
Unisex rates and joint life basis
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