Annuity Rates, Annuities, Pensions, Divorce Annuity Rates Charts
Home News Annuity Rates Annuities Pension Annuity Impaired Annuity Annuity Quotes Pensions Divorce Resources

4 May 2018 last updated

Annuity rates reduce as interest rate rise unlikely due to weak UK growth

Annuity rates have reduced by providers after data shows the weakest UK growth over a quarter since 2012 and the prospect of higher interest rates in May are unlikely.

The latest data shows the UK economy is the weakest since 2012 with GDP at 0.1% for the quarter down from 0.4% for the previous quarter due to construction output falling significantly and weak manufacturing figures.

Investors were expecting the Bank of England to announce an interest rate rise in May, however, this is unlikely and the 15-year gilt yields reduced 12 basis from the months high to end at 1.67%.

Annuities have been reduced with standard rates lower by 0.92% in May with enhanced annuity rates down by 1.30% as the expectation is gilt yields are unlikely to rise in the short term.

The governor of the Bank of England, Mar Carney, said interest rates could rise more gradually than expected due to continuing uncertainty over Brexit and mixed data on the economy.

Annuity rates reduce
  Annuities lower after gilt yields fall following expectation of interest rate rise is unlikely
  More annuity topics
  Quarter 2 News 2018
  News & articles
  Archive news stories
  Flexi-access drawdown
  Annuity rates tables
  Outlook for 2024
  Annuity rates charts
  15-year gilt yields
  Latest annuity rates

Annuity rates fall from their peak

The 15-year gilt yields are higher by 9 basis points to 1.67% in April although yields did increase to 1.79% on the expectation of higher interest rate.

Gilt yields and annuity rates
Fig 1: Chart comparing standard annuity rates and 15-year gilt yields

The above chart compares the change in annuity rates and 15-year gilt yields since August 2017. Yields have been stronger over this period although providers have been more aggressive with increasing rates since December with the expectation of higher interest rates.

For our benchmark example of a 65 year old with £100,000 purchasing a single life, level income basis the income reached a high of £5,545 pa in February. This has been reduced slightly to £5,613 pa and could reduce further in the short term if an interest rate rise is delayed to later in the year.

Slowdown of economy impact rates

The combination of slowing economy due to a significant fall in construction output and weak manufacturing figures is with the backdrop of lower UK consumer inflation.

Inflation has reduced from 2.7% in February to 2.5% in March and heading for the Bank of England target of 2.0%. Inflation first started to rise after the Brexit vote sent the pound lower from 1.45 USD to 1.20 USD increasing the cost of imports. This impact looks like it is coming to an end especially with the pound rising to 1.40 USD in April although it has since reduced slightly.

Unemployment is at a 40 year low and the UK economy has grown every year since 2010 so this would suggest growth rates could be maintained. The Office of national statistics has stated that the fall in GDP was not due to bad weather so the struggling economy is likely to deter the Bank of England from raising rates over the next couple of months.

For annuities the providers are likely to make only small changes to rates until there is more certainty of direction for gilt yields.

News related stories:
Pension annuity rates surge almost 4% by providers with higher yields
Annuities rise up to 5% with higher yields from US economic growth
Annuity rates rise to highest for the year as yields remain level
Pension annuity providers reduce rates despite interest rate rise
Related internet links:
BBC - UK inflation falls to lowest in a year
BBC - UK economy in weakest growth since 2012
Annuity Rates
  Age Single Joint  
  55 £6,132 £5,784  
  60 £6,532 £6,234  
  65 £7,247 £6,808  
  70 £8,170 £7,616  
£100,000 purchase, level rates, standard
Unisex rates and joint life basis
  Annuity Rates  
Annuity Quotes
  Plan your annuity and get quotes from the 12 leading providers  
  free annuity quote Free Annuity Quotes
  annuity quote no obligation No Obligation
  annuity quote all providers From All Providers
  Annuity Quote  
  Annuity Rates News:

Annuity rates edge up with high yields
Annuity rates edge up Annuity rates up with gilt yields at a high of 4.71% as UK inflation misses target
Retirement income up 121% in four years
Record annuity rates and equity markets Retirement income up 121% with record high annuity rates and equity markets
Annuities rise with higher US inflation
Annuities and gilts rise Enhanced annuities rise as gilt yields reach record 4.70% with higher US inflation
Gilt yields record high after strong US data
Gilt yields at record high of 4.65% Gilt yields hit record high of 3.65% after strong US inflation and economic data
Annuity rates could recover by 3%
Annuity rates could recover 3pc Annuity rates could recover +3% after strong US jobs sends gilt yields higher

  Follow Us:
You can follow the latest annuity updates on Twitter or as a fan on Facebook
  Facebook Page Twitter Page   This website is for marketing purposes only and does not provide specific financial or legal advice. The website security is issued by GeoTrust and Equifax. Copyright©2001-24 All Rights Reserved