Another record low for annuities

The Bank of England has reduced interest rates to 0.25% as well as started measures to stimulate the economy with quantitative easing (QE) buying £60 billion of UK government gilts and £10 billion of corporate bonds.

This sent the 15-year gilt yields to a record low of 0.90% on 11 August before recovering to 0.93% for the day. For the month the 23 basis point fall send annuity rates over 4% lower.

Standard providers decreased rates by an average of 4.57% and we would expect in the short term rates may increase further by 2.27%.

For smoker and enhanced annuity providers decreased their rates by an average of 4.28% on average and in the short term rates may increase by 1.98%.

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 6.9%

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