Annuity rates still at thirteen year high even with lower gilt yields

15-year gilt yields chart - Based on figures for November 2022

Annuity Rates UK - November 2022 review

Providers keep annuities at a thirteen year high with our benchmark annuity rate up 40% in 2022 compared to the 15-year gilt yields rising 24%. During November gilt yields have reduced -35 basis points to 3.52% as the effect of the mini budget diminishes.

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The difference between annuities and gilt yields suggest providers have priced in further rise in yields in the short term expecting central banks to continue raising base rates.

Therefore annuity rates may remain at the current level, fall or rise slightly until further progress is made by the 15-year gilt yields.

Providers of standard annuities decrease annuity rates by an average of -6.10% for this month and we would expect rates to rise by 2.50% in the short term if yields remain at current levels.

For smoker and enhanced annuity providers have decreased their rates by an average of -3.75% and we would expect rates to rise by 0.15% in the short 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   7%   0%   93% Increases of: max 1.6%   Decreases of: max -10.3%

Fig 1: Annuity rate changes for the whole market

Fig 2: Change in standard rates last month compared to gilt yields

Fig 3: Change in enhanced rates last month compared to gilt yields