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9 June 2017 last updated
Pension annuities recover slightly as gilt yields remain volatile
15-year gilt yields chart
Based on figures for May 2017
Latest gilt yield chart

Pension annuities have recovered from three months of declining rates during a volatile month with 15-year gilt yields rising as high as 1.60% before returning to near the level at the start of the month.

Standard rates:  
annuity rates up 1.25%
Enhanced rates:  
annuity rates up 0.39%
Gilt yields:  
annuity rates up 3 basis point

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Gilt yields lower after US uncertainty

The 15-year gilt yields decreased by only 3 basis points to 1.43% during the month. The yields were as high as 1.60% after Macron won the French election but soon headed south with concerns over Donald Trump's dismissal of FBI Director James Comey followed by mixed economic data on US housing and industrial output.

Over the short term yields are -3 basis points with standard providers increasing rates by an average of 1.25% and we would expect rates may decrease further by -1.55% in the short term.

For smoker and enhanced annuity providers increased their rates by an average of 0.39% on average and rates may decrease by -0.69% 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   71%
annuity rates no change   0%
annuity rates decrease   29%
Increases of:
up to 5.0%

  Decreases of:
up to 2.4%
  Fig 1: Annuity rate changes for the whole market

For the month of May 71% of annuity rates increased by up to 5.0% with 0% remaining unchanged and 29% decreasing.

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 1.25% during the month. For those aged 70 buying a single life, 3% escalation increased by 4.26% and for age 65 on a single life, level with or without 10 year guaranteed period are higher by up to 3.21%.

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 were mixed with those aged 55 on a single life, level basis up 3.12% and single life, 3% escalation higher by 4.28%. There were a number of decreases for joint life aged 55, 70 and 75 lower by as much as -2.43%.

For the latest updates see Annuity Rates Review.

Changes to the 15-year gilt yields

The yields change for the month from 1.46% to 1.43% or -3 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 - May 2017
Day Rate (%) Change (bp*)
2 1.47 +1
3 1.46 -1
4 1.51 +5
5 1.52 +1
8 1.55 +3
9 1.60 +4
10 1.56 -4
11 1.54 -2
12 1.48 -6
15 1.54 +6
16 1.52 -2
17 1.46 -6
18 1.44 -2
19 1.47 +3
22 1.47 0
23 1.46 -1
24 1.45 -1
25 1.42 -3
26 1.40 -2
30 1.39 -1
31 1.43 +4
  Table 1: Daily 15-year gilt yields and changes
* bp - basis points

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Annuities up 7% as yields recover after election of Donald Trump
Enhanced annuity rates up 2.4% as gilt yields recover from Brexit
Annuity Rates
  Age Single Joint  
  55 £3,851 £3,569  
  60 £4,268 £3,973  
  65 £4,965 £4,581  
  70 £5,831 £5,274  
£100,000 purchase, level rates, standard
Unisex rates and joint life basis
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