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9 February 2017 last updated
Annuities higher for the fifth month in a row with sign of rising inflation
15-year gilt yields chart
Based on figures for January 2017
Latest gilt yield chart
 

Gilt yields end 17 basis points higher with signs of rising inflation and annuity rates continue upwards for the fifth consecutive month.

Standard rates:  
annuity rates up 1.09%
Enhanced rates:  
annuity rates up 0.51%
Gilt yields:  
annuity rates up 17 basis point



 
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Annuity rates higher for fifth month

The 15-year gilt yields increased to 1.79% by 17 basis points during the month. There are signs of rising inflation as US economic reports show signs of rising inflation. In the UK inflation was higher rising from 1.2% in November to 1.6% in December.

Standard providers increase rates by an average of 1.09% and we would expect in the short term rates may increase by 0.61%.

For smoker and enhanced annuity providers increased their rates by an average of 0.51% on average and in the short term rates may increase by 1.19%.

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   71%
annuity rates no change   12%
annuity rates decrease   17%
Increases of:
up to 3.0%

  Decreases of:
up to 2.1%
  Fig 1: Annuity rate changes for the whole market


For the month of January 71% of annuity rates increased by up to 2.6% with 12% remaining unchanged and 17% decreasing by no more than 2.1%.

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 1.09% during the month. For those aged 55 to 60 buying a single life or joint life on a level basis with increases of up to 2.6%.

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 increased by an average of 0.51% with a larger rise of 3.0% for those aged 55 buying 100% joint life, level annuity. The highest decrease was for those aged 55 with single life 3% escalating rate reducing by 2.1%.


For the latest updates see Annuity Rates Review.

Changes to the 15-year gilt yields

The yields change for the month was from 1.62% to 1.79% or 17 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 - January 2017
Day Rate (%) Change (bp*)
3 1.72 +10
4 1.72 0
5 1.68 -4
6 1.76 +8
9 1.71 -4
10 1.74 +3
11 1.73 -1
12 1.69 -4
13 1.75 +6
16 1.71 -4
17 1.69 -2
18 1.71 +2
19 1.78 +7
20 1.80 +2
23 1.74 -6
24 1.76 +2
25 1.84 +8
26 1.88 +4
27 1.84 -4
30 1.81 -3
31 1.79 -2
  Table 1: Daily 15-year gilt yields and changes
* bp - basis points


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UK annuities could rise 5% as US bond selloff sends yields higher
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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