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31 October 2011 last updated
Annuity Rates - October 2011 review
Smoker annuities increase despite
volatile gilt yields

This month more annuities increased than decreased with smoker pension annuity rates improving while standard annuities decreased.

Of the total annuity rates market for October 26% of annuity rates did not change. There were 43% of annuity rates that increased and this was from the smoker rates with the standard rates remaining unchanged or falling.

These figures are based on a fund of £100,000 from male, female and joint, with different features such as level and escalating.

The bank of England's latest round of Quantitative Easing injecting £75 billion is likely to mean lower gilt yields and annuity rates during the rest of this year.
Annuity Rates Review October 2011
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Gilt yields volatile due to Quantitative Easing

Find out more: gilt yields for October

Annuities are based on the 15-year gilt yields which reduced by only 1 basis points down to 2.90% although the range for October was from 2.39% to 3.23% or an 84 basis point change which is very volatile and due to the uncertainty in the Eurozone and Quantitative Easing by the Bank of England.

Fig 1 below shows the
annuity rate changes for the whole market and the proportion that have either increased, decreased or or did not change. It also shows the range increases or decreases of the annuity rates over 1 month ending 31st October 2011:

Annuity Rates Market Changes
Increase No change Decrease
annuity rates increase   43%
annuity rates no change   26%
annuity rates decrease   31%
Increases of:
0.3% - 2.2%

  Decreases of:
0.2% - 2.0%
  Fig 1: Annuity rates changes for the whole market ending Oct 2011

Fig 3 for October shows there was a balanced change in the market overall with a strong increase in the smoker annuity rates dominating with increases of 0.3% to 2.2% such as annuities for females single life with 3% escalation. Elsewhere the decreases were of a similar level of 0.2% to 2.0% such as rates for males single life and a 10 year guaranteed period. A quarter of annuity rates remained unchanged during October.

Fig 2 below shows for a fund of £100,000 the change in annuity rates for males, females and joint from age 55 to 75 with different annuity options such as level or escalating over 1 month ending 31st October 2011:

Annuity Rate Changes - Standard
  Male Female Joint
annuity rates down   0.61%
annuity rates down   0.21%
annuity rates down   0.52%
Level +
10 yr guarantee
annuity rates down   0.59%
annuity rates down   0.21%
annuity rates down   0.35%
3% escalation
annuity rates down   0.72%
annuity rates down   0.23%
annuity rates down   0.63%
Annuity Rate Changes - Smoker
  Male Female Joint
annuity rates up   0.62%
annuity rates up   0.98%
annuity rates up   0.85%
Level +
10 yr guarantee
annuity rates up   0.90%
annuity rates up   0.80%
annuity rates up   0.45%
3% escalation
annuity rates up   0.99%
annuity rates down   1.02%
annuity rates down   1.14%
  Fig 2: Annuity rates change for 1 month ending 31 Oct 2011

Standard annuities have reduced by similar amounts except for female rates where the decrease is less and for female level with a 10 year guaranteed period the rates increased by 0.21%. The decrease of an average of 0.40% is significantly less than the decrease of 3.61% for September.

In contrast for the second month in a row smoker annuity rates increased by an average of 0.46% with stronger increases than September from single life males and females. This increase was mainly due to Liverpool Victoria increasing their rates across the board during October to gain market share (as they did in September). The impaired annuity rates also increased over the same period. Joint life smoker rates decreased and this was due to providers re-pricing their rates.
News and Articles :
Find out more about annuity rates news and articles.
Annuity rates - pensioner income now 43% lower
Quantitative easing - annuity rates and income 6% lower
Annuity Rates
  Age Single Joint  
  55 £5,025 £4,644  
  60 £5,501 £5,102  
  65 £6,168 £5,832  
  70 £7,003 £6,583  
£100,000 purchase, level rates, standard
Unisex rates and joint life basis
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