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4 April 2021 last updated

Enhanced annuity rates up over 6pc as providers adjust for higher yields

Enhanced annuity rates up
Standard rates:  
annuity rates change 1.73%
Enhanced rates:  
annuity rates change 6.11%
Gilt yields:  
annuity rates change 9 basis point
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15-year gilt yields chart - Based on figures for March 2021
Latest gilt yield chart

March 2021 Review

Providers have increased enhanced annuity rates an average of 6.11% in March. The rates are catching up to the 15-year gilt yields that were higher by a record 60 basis points the previous month.

Smoker rates improved by a greater amount than impaired rates and annuities for single life out performed those for joint life.

As 15-year gilt yields are at similar levels at the beginning of April enhanced annuities are unlikely to improve whereas standard rates are rising at a slower rate and there is still some room for increases.

Find related news here:
Pension annuities rise 3.2pc as investors sell gilts and bonds
Gilt yields rise record amount of 60 basis points on inflation fears

Providers of standard annuities increased annuity rates by an average of 1.73% for this month and we would expect rates to rise by 3.29% in the medium term if yields remain at current levels.

For smoker and enhanced annuity providers have increased their rates by an average of 6.11% and rates and we would expect rates to fall by -1.34% in the medium term if yields do not fall.

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   100%
annuity rates no change   0%
annuity rates decrease   0%
Increases of:
max 13.2%


Decreases of:
max -0.0%

  Fig 1: Annuity rate changes for the whole market

For the month 100% of annuity rates increased by up to 13.2% with 0% remaining unchanged and 0% decreasing by as much as to -0.0%.

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

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 the latest updates see Annuity Rates Review.

Changes to the 15-year gilt yields

The yields change for the month from 1.14% to 1.23% or 9 basis point. Table 1 below shows the daily 15-year gilt yields and the increase or decrease from the previous day's close:

15-Year Gilt Yields - March 2021
Day Rate (%) Change (bp*)
1 1.12 -2
2 1.07 -5
3 1.06 -1
4 1.09 +3
5 1.10 +1
8 1.10 0
9 1.06 -4
10 1.06 0
11 1.09 +3
12 1.19 +10
15 1.16 -3
16 1.15 -1
17 1.19 +4
18 1.24 +5
19 1.21 -4
22 1.18 -3
23 1.12 -6
24 1.11 -1
25 1.09 -2
26 1.11 +2
29 1.15 +4
30 1.20 +5
31 1.23 +3
  Table 1: Daily 15-year gilt yields and changes
* bp - basis points

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Annuities set to rise 3pc as yields boosted by higher inflation forecast
Annuity rates higher as investors more optimistic for the economy
Gilt yields fall with more Covid-19 cases sending annuity rates lower
Annuity Rates
  Age Single Joint  
  55 £3,620 £3,320  
  60 £4,081 £3,783  
  65 £4,786 £4,382  
  70 £5,656 £5,102  
£100,000 purchase, level rates, standard
Unisex rates and joint life basis
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