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5 July 2023 last updated

Yields rise further as central banks plan for more interest rate hikes

Annuities up as gilt yields rise
Standard rates:  
annuity rates change 3.02%
Enhanced rates:  
annuity rates change 0.47%
Gilt yields:  
annuity rates change 10 basis point
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15-year gilt yields chart - Based on figures for June 2023
Latest gilt yield chart

Annuity Rates UK - June 2023 review

Providers of standard annuities increase rates by +3.02% on average following a further +10 basis point rise in the 15-year gilt yields. In contrast enhanced annuity rates are higher by an average of 0.47%.

Investors were surprised by comments made by the Federal Reserve that the median expectation for interest rates is 5.6% indicating several more hikes were required when one was expected.

Chairman Jerome Powell has started it was "strongly committed" to driving inflation down to the 2% target and that there was still a long way to go towards this objective.

Find related news here:
Gilt yields up 44 basis points as central banks to raise interest rates
Annuities rise 4pc with soaring gilt yields due to high inflation for longer

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 3.08%. The highest increase during May is for a 65 year old purchasing a 50% joint life and 3% escalating annuity up 5.57%.

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   78%
annuity rates no change   3%
annuity rates decrease   19%
Increases of:
max 5.5%


Decreases of:
max -1.6%

  Fig 1: Annuity rate changes for the whole market

For the month 78% of annuity rates increased by up to 5.5% with 3% 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 4.47% to 4.57% or +10 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 - June 2023
Day Rate (%) Change (bp*)
1 4.41 -6
2 4.44 +3
5 4.50 +6
6 4.48 -2
7 4.52 +4
8 4.52 0
9 4.51 -1
12 4.59 +8
13 4.69 +10
14 4.64 -5
15 4.61 -3
16 4.61 0
19 4.68 +7
20 4.53 -17
21 4.61 +8
22 4.59 -4
23 4.54 -5
26 4.50 +6
27 4.55 +5
28 4.51 -4
29 4.55 +4
30 4.57 +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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