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30 September 2011 last updated
Annuity Rates - September 2011 review

Annuity rates down by 5.5% as uncertainty continues in Europe

Despite the efforts of Germany to agree a Eurozone debt plan investors have continued to move funds to safe havens such as UK government bonds and gilts.

This increases the price and reduces the yields with the 15-year gilt yields lower by 43 basis points to 2.91% for September.

The fall in gilt yields means annuity rates have also reduce and this month standard rates are lower by up to 5.5% although many smoker annuities managed a small increase of about 0.5%.

If the Eurozone fail to convince investors that they are in control of the debt crisis it is likely that annuity rates will follow gilt yields to lower levels.

Annuity Rates Review September 2011
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Standard annuity rates fall in line with gilt yields

Find out more: gilt yields for September

Of the total annuity rates market for September only 3% of annuity rates did not change, based on a fund of £100,000 from male, female and joint and with different features such as level and escalating. The other 97% either increased or decreased with the majority decreasing significantly.

Fig 3 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 increases or decreases of the annuity rates
over 1 month ending 30th September 2011:

Annuity Rates Market Changes
Increase No change Decrease
annuity rates increase   27%
annuity rates no change   3%
annuity rates decrease   70%
Increases of:
0.5% - 1.0%

  Decreases of:
2.5% - 5.5%
  Fig 3: Annuity rates changes for the whole market ending Sept 2011

Fig 3 above shows that for September there was a strong downward movement with 70% of annuity rates decreasing with significant falls of between 2.5% and 5.5%. Although 27% of annuities increased the rise was small at between 0.5% and 1.0% and all of these were from providers of smoker annuity rates.

Fig 4 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 30th September 2011:

Annuity Rate Changes - Standard
  Male Female Joint
annuity rates down   3.47%
annuity rates down   3.24%
annuity rates down   3.60%
Level +
10 yr guarantee
annuity rates down   3.78%
annuity rates down   3.41%
annuity rates down   3.51%
3% escalation
annuity rates down   4.26%
annuity rates down   3.36%
annuity rates down   3.99%
Annuity Rate Changes - Smoker
  Male Female Joint
annuity rates up   0.55%
annuity rates up   0.16%
annuity rates up   0.03%
Level +
10 yr guarantee
annuity rates up   0.52%
annuity rates up   0.35%
annuity rates up   0.24%
3% escalation
annuity rates up   0.65%
annuity rates down   0.05%
annuity rates down   0.35%
  Fig 4: Annuity rates change for 1 month ending 30 Sept 2011

Standard annuities have reduced by similar amounts except for male 3% escalating rates that have reduced by a greater amount of 4.26% from August. Smoker annuity rates on the other hand have increased slightly overall by 0.26% and this increase is due to providers of smoker rates, in particular Liverpool Victoria, being very competitive across the board for september.

Throughout September the Eurozone debt crisis has been responsible for the volatility on the equity markets and this in turn has seen investments seeking safer locations such as UK gilts and ultimately the reduction in annuity rates.
Annuity Rates
  Age Single Joint  
  55 £4,358 £4,209  
  60 £4,839 £4,644  
  65 £5,613 £5,193  
  70 £6,292 £5,860  
£100,000 purchase, level rates, standard
Unisex rates and joint life basis
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