Annuity rates up to 8% lower after Brexit vote

The 15-year gilt yields have collapsed by 52 basis points following the Brexit vote in the EU Referendum. Investors have been seeking safe havens such as bonds and gilts sending prices higher and yields lower. As a result providers of annuities have lowered their rates by up to 8% reducing the income for people retiring and taking their pension benefits.

Standard providers decreased rates by an average of 2.60% and we would expect in the short term rates may decrease further by 2.90%.

For smoker and enhanced annuity providers decreased their rates by an average of 3.14% on average and in the short term rates may decrease again by 2.36%.

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   0%   0%   100% Increases of: none   Decreases of: up to 7.7%

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