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7 August 2015 last updated
Standard annuities increase as providers more competitive
15-year gilt yields chart
Based on figures for July 2015
15-year gilt yields July 2015

After the rise in rates from enhanced providers, standard annuity rates have increase by up to 4.3% although a dip in yields may see this reversed by the end of August.

Standard rates:  
annuity rates up 1.50%
Enhanced rates:  
annuity rates up 0.18%
Gilt yields:  
annuity rates up 12 basis point

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Standard rates rise with competition

Providers of standard rates have increased annuities by as much as 4.3% with more competition from Canada Life and Hodge Life. This follows strong gains with the smoker and enhanced annuities of up to 8.0% from providers such as Just Retirement, Partnership, Retirement Advantage and Liverpool Victoria.

Even so concerns about the worlds second largest economy China has seen investors seek safe havens such as US Treasury notes, German Bunds and UK government bonds and gilts increasing the price and lowering yields. This could result in lower annuity rates across the board by the end of August if yields do not recover.

Standard providers were higher by an average of 1.50% and we would expect to see a decrease of 2.70% in the short term and in the medium term of 3 months annuity rates will decrease by 4.96% if yields do not improve further.

Smoker and enhanced annuity providers decreased their rates slightly by 0.18% on average with a decrease of 1.02% possible in the short term and in the medium term of 3 months we can expect a decrease of 5.17%.

Equity markets started at 6,521 and increased by 175 points to end at 6,696.

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 increase   64%
annuity rates no change   10%
annuity rates decrease   26%
Increases of:
up to 4.3%

  Decreases of:
up to 1.4%
  Fig 1: Annuity rate changes for the whole market

The majority of rates increased with 64% rising, 10% remaining unchanged and 26% decreasing.

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

Standard annuities increased this month for all annuities and in particular for those aged 55 on a single and joint life basis. There were smaller gains for those aged 60 to 75.

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 enhanced and smoker rates providers decreased virtually all annuities but only by up to 1.4% for those aged 55 with a 50% joint life rates. There were minor gains for single life rates on a level and escalating basis for those aged 70 to 75. For the latest updates see Annuity Rates Review.

Changes to the 15-year gilt yields

The yields change for the month was from 1.40% to 2.28% or 12 basis points lower. Fig 2 below shows the daily 15-year gilt yields and the increase or decrease from the previous day's close:

15-Year Gilt Yields - July 2015
    Wed 1st Thurs 2nd Fri 3rd
gilt yields up   0.12
gilt yields down   0.05
gilt yields down   0.04
Mon 6th Tues 7th Wed 8th Thurs 9th Fri 10th
gilt yields down   0.01
gilt yields down   0.14
gilt yields up   0.04
gilt yields up   0.06
gilt yields up   0.12
Mon 13th Tues 14th Wed 15th Thurs 16th Fri 17th
gilt yields up   0.01
gilt yields up   0.03
gilt yields down   0.04
gilt yields down   0.02
gilt yields up   0.01
Mon 20th Tues 21st Wed 22nd Thurs 23rd Fri 24th
gilt yields down   0.02
gilt yields up   0.01
gilt yields down   0.05
gilt yields down   0.05
gilt yields down   0.08
Mon 27th Tues 28th Wed 29th Thurs 30th Fri 31st
gilt yields up   0.01
gilt yields up   0.01
gilt yields up   0.03
gilt yields down   0.02
gilt yields down   0.06
  Fig 2: Daily 15-year gilt yields and changes

News related stories:
Annuities could rise as yields boosted by EU and US bond sell off
Best annuities could rise as Federal Reserve delays raising rates
UK annuities could rise as gilt yields make strong recovery
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Annuity Rates
  Age Single Joint  
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  60 £4,783 £4,292  
  65 £5,456 £4,877  
  70 £6,270 £5,588  
£100,000 purchase, level rates, standard
Unisex rates and joint life basis
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