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4 August 2023 last updated

Pension annuities fall after lower than expected inflation hits gilt yields

Pension Annuities fall
Standard rates:  
annuity rates change 0.08%
Enhanced rates:  
annuity rates change 0.27%
Gilt yields:  
annuity rates change 4 basis point
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15-year gilt yields chart - Based on figures for July 2023
Latest gilt yield chart

Annuity Rates UK - July 2023 review

The strong rise in pension annuities up over 12% in the last three months comes to an end after the unexpected faster fall in inflation, although rates remain at a fourteen year high.

This larger fall in consumer price inflation for the US surprised analysts after reducing from 4% in June to 3% on 12 July. In the UK the retail price index also reduced more than forecasts from 8.7% in June to 7.9% on 19 July.

Analysts expected inflation to be higher for longer with central banks raising interest rates and 15-year gilt yields reached a high of 4.91% on 7 July. With the fall in inflation yields reduced -52 basis points to 4.39% on 24 July before recovering to 4.53% by the end of the month.

Central banks are expected to continue to raise interest rates with a 0.25% rise by the Federal Reserve on 26 July to a range of 5.25%-5.50%.

Find related news here:
Annuity rates at risk as inflation falls with gilt yields 52 basis points lower
Yields rise further as central banks plan for more interest rate hikes

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 and has increased 0.45%. The highest increase during July is for a 60 year old purchasing a 50% joint life and 3% escalating annuity up 3.34%.

Providers of standard annuities increased annuity rates by an average of +3.02% for this month and we would expect rates to fall by -2.02% in the short term if yields remain at current levels.

For smoker and enhanced annuity providers have increased their rates by an average of +0.47% and we would expect rates to rise by +0.53% 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
annuity rates decrease   41%
annuity rates no change   2%
annuity rates decrease   57%
Increases of:
max 3.5%


Decreases of:
max -3.3%

  Fig 1: Annuity rate changes for the whole market

For the month 41% of annuity rates increased by up to 3.5% with 2% remaining unchanged and 57% decreasing by as much as to -3.3%.

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 4.57% to 4.53% or -4 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 - July 2023
Day Rate (%) Change (bp*)
3 4.62 +5
4 4.60 -2
5 4.67 +7
6 4.76 +9
7 4.84 +8
10 4.86 +2
11 4.85 -1
12 4.75 -10
13 4.63 -12
14 4.65 +2
17 4.67 +2
18 4.57 -10
19 4.42 -15
20 4.49 +7
21 4.50 +1
24 4.48 -2
25 4.51 +3
26 4.54 +3
27 4.53 -1
28 4.56 +3
31 4.53 -2
  Table 1: Daily 15-year gilt yields and changes
* bp - basis points
News related stories:
Pension annuities up 3pc as yields rise expecting higher base rates
Annuity rates could rise 2pc as gilt yields recover after banking crisis
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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