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8 December 2017 last updated
Annuity rates lower as yields end flat after interest rate rise
15-year gilt yields chart
Based on figures for November 2017
Latest gilt yield chart

Majority of smoker and enhanced annuity rates reduced by providers after little change of gilt yields following the Bank of England 0.25% hike of interest rates.

Standard rates:  
annuity rates change 0.81%
Enhanced rates:  
annuity rates change 1.08%
Gilt yields:  
annuity rates up 3 basis point

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Smoker and enhanced rates lower

There was little change in the 15-year gilt yield down by 3 basis point to 1.63% during the month despite positive data that the eurozone economy has shown signs of further recovery.

For smoker and enhanced annuity providers lowered their rates by an average of -1.08% and rates may increase by 0.78% in the short term.

Providers of standard annuities increased rates last month and only a rise of 0.81% for this month and we would expect rates to decrease by -1.11% in the short term.

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   35%
annuity rates no change   6%
annuity rates decrease   59%
Increases of:
up to 4.1%


Decreases of:
up to -3.7%

  Fig 1: Annuity rate changes for the whole market

For the month of November 35% of annuity rates increased by up to 4.1% with 6% remaining unchanged and 59% decreasing by as much as -3.7%

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 increased by an average of 0.81%% during the month. The largest rise was for 50% joint life 3% escalating rates aged 75 up by 4.41% for the month. The largest decrease was for those aged 55 to 60 on a single life basis lower by -0.79% for the month.

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 the majority of rates decreased by -0.89% for the month on average. The largest fall was for those aged 55 on a single life, level and 3% escalation the rates reduced by -3.78%.

For the latest updates see Annuity Rates Review.

Changes to the 15-year gilt yields

The yields change for the month from 1.66% to 1.63% or 3 basis point. 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 - November 2017
Day Rate (%) Change (bp*)
1 1.66 0
2 1.60 -6
3 1.60 0
6 1.60 0
7 1.57 -3
8 1.56 -1
9 1.59 +3
10 1.66 +7
13 1.65 -1
14 1.64 -1
15 1.61 -3
16 1.63 +2
17 1.62 -1
20 1.61 -1
21 1.58 -3
22 1.59 +1
23 1.57 -2
24 1.56 -1
27 1.56 0
28 1.57 +1
29 1.65 +8
30 1.63 -2
  Table 1: Daily 15-year gilt yields and changes
* bp - basis points

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Annuity Rates
  Age Single Joint  
  55 £4,352 £3,999  
  60 £4,783 £4,292  
  65 £5,456 £4,877  
  70 £6,270 £5,588  
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Unisex rates and joint life basis
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