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8 January 2024 last updated

Annuities down 4pc with falling gilt yields expecting lower interest rates

Annuity rates down -4pc
Standard rates:  
annuity rates change 4.42%
Enhanced rates:  
annuity rates change 2.76%
Gilt yields:  
annuity rates change 65 basis point
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15-year gilt yields chart - Based on figures for December 2023
Latest gilt yield chart

Annuity Rates UK - December 2023 review

Annuities are down -4.42% as the 15-year gilt yields reduced by -65 basis points in December to end at 3.95% the lowest level since April 2023.

Gilt yields reduced after the Federal Reserve was more open to a lower interest rates in 2024 and the Bank of England decided to leave interest rates unchanged at 5.25% for the fourth month since 3 August 2023.

Analyst are expect the Federal Reserve to reduce interest rates three times starting in June 2024 or even earlier in March.

In the UK the Bank of England continues to say it does not intend to reduce rates even though inflation has reduced to a two year low of 3.9%, lower than expected.

Providers have reduced Annuity rates for three months in a row after reaching a fourteen high on 1 October 2023. Annuities remain historically high and providers could increase rates with more competition in 2024 and if gilt rates rebound after the steep falls.

Find related news here:
Annuity rates at risk with lower gilt yields as inflation falls to 3.9pc
Gilt yields reduce 53 basis points with no prospect of interest rate rise

Our benchmark example for a 65 year old using £100,000 to purchase a single life and level annuity remains at a fourteen year high even though rates decreased by -4.83% with income of £6,860 pa.

Providers of standard annuities decreased annuity rates by an average of -4.42% for this month and we would expect rates to decrease by -0.83% in the medium term if yields remain at current levels.

For smoker and enhanced annuity providers have increased their rates by an average of -2.76% and we would expect rates to decrease by -0.99% 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   0%
annuity rates no change   2%
annuity rates decrease   98%
Increases of:
max 0.0%


Decreases of:
max -6.3%

  Fig 1: Annuity rate changes for the whole market

For the month 0% of annuity rates increased by up to +0.00% with 2% remaining unchanged and 98% decreasing by as much as to -6.3%.

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 4.60% to 3.95% or -65 basis points. 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 - December 2023
Day Rate (%) Change (bp*)
1 4.52 -8
4 4.57 +5
5 4.41 -16
6 4.32 -9
7 4.34 +2
8 4.40 +6
11 4.44 +4
12 4.25 -19
13 4.19 -6
14 4.15 -4
15 4.05 -10
18 4.06 +1
19 4.03 -3
20 3.89 -14
21 3.91 +2
22 3.88 -3
27 3.82 -6
28 3.90 +8
29 3.95 +5
  Table 1: Daily 15-year gilt yields and changes
* bp - basis points
News related stories:
Annuities peak with falling gilt yields and unchanged interest rates
Pension annuities reduce by -3pc as gilt yields remain volatile
Annuity Rates
  Age Single Joint  
  55 £5,736 £5,481  
  60 £6,132 £5,880  
  65 £6,860 £6,462  
  70 £7,678 £7,215  
£100,000 purchase, level rates, standard
Unisex rates and joint life basis
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