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

20 November 2015 last updated

Annuity rates uncertain as US Fed signals interest rate rise more likely

The future of annuity rates is uncertain as the Federal Reserve signals a rise in interest rates looks more likely with improved economic data while the ECB continues with QE measures.

The US Federal Reserve has given the strongest signal yet that it will increase interest rates as early as December.

Most members believe there is enough evidence that economic conditions will be right for a rise while a few policymakers still think delays will mean a rise in 2016.

Higher interest rates would suggest improving yields in the future for gilts and annuity rates, primarily based on the 15-year gilt yield, would also increase.

However, the ECB could decrease their interest rates and extend their €1.1 trillion quantitative easing programme which would decrease yields and annuities.

As a result the yield spread on 5-year US Treasury bonds and German bonds widen to 180 basis points, the largest difference in more than a decade..

Annuity rates uncertain as Fed signals interest rate rise
  A monetary-policy divergence is preventing yields and annuities from rising in the near future
  More annuity topics
  Quarter 4 News 2015
  News & articles
  Archive news stories
  Flexi-access drawdown
  Annuity rates tables
  Outlook for 2019
  Annuity rates charts
  15-year gilt yields
  Latest annuity rates

15-year gilt yields more volatile

Analysts call the widening of 5-year bonds a monetary-policy divergence caused by the hawkish Federal Reserve intending to raise interest rates and the dovish European Central Bank (ECB) considering to extend quantitative easing. This has driven the gap between the 10-year bonds where US Treasury are at 2.24% compared to German bonds at only 0.47%.

The 15-year gilt yields initially increased in November by 15 basis points from 2.23% to 2.38%. This would normally give annuity providers the opportunity to increase annuity rates by 1.5%, however, yields have now reduced back to 2.24%.

  Benchmark annuity rates and gilt yields
  May Jun Jul Aug Sep Oct Nov
Rate £5,738 £5,781 £5,847 £5,847 £5,828 £5,828 £5,824
Yield 2.21% 2.41% 2.28% 2.28% 2.10% 2.23% 2.24%

The above table shows yields have been volatile in the last six months after hitting an all time low of 1.68% in January, annuity rates for our benchmark example for a person aged 65 with a fund of £100,000 buying a single life, level annuity income offered has remained consistence over this period.

Inflation target still 2% level

For the UK, Europe and US the inflation target remains at 2%. The Federal Reserve policymakers are prepared to raise interest rates for the first time since 2006 provided there are no unanticipated shocks likely to affect the economic outlook.

The original intention to raise rates was delayed as financial markets triggered uncertainty over the China economy. The Federal Reserve have said the economy is on target to achieving the 2% rate of inflation in the future.

For Europe after the ECB started the QE programme eight months ago it remains plagued by weak growth and low inflation. German economist have said core inflation, excluding volatile components such as energy, is increasing and currently at the 1% level.

Even in the UK increasing interest rates has been delayed until later in 2016. Only if the US, Europe and UK can move in the same direction together in terms of interest rates and inflation will gilt yields move consistently higher followed by annuity rates although this may not be seen for another year.

News related stories:
Gilt yields and equities fall as Federal Reserve unclear about rate rise
Annuities could rise as yields boosted by EU and US bond sell off
Best annuities could rise as Fed delays raising interest rates
Pension annuity rates to reduce as ECB starts €1.1 trillion stimulus
Related internet links:
Marketwatch - Treasury yields fall before rate hike
BBC - US Federal Reserve signals December rate rise likely
Guardian - Interest rate hikes likely in December
Telegraph - Fed sends strong signal that rates will rise
Annuity Rates
  Age Single Joint  
  55 £3,947 £3,702  
  60 £4,391 £4,052  
  65 £5,098 £4,638  
  70 £6,055 £5,457  
£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:

Gilt yields rise with US-China trade deal
Gilt yields rise with US-China trade deal

15-year gilt yields rise 14 basis points with annuity rates up for the second month

Providers increase annuity rates by 5%
Providers increase annuity rates Standard annuities rise over 5% with gilt yields recovering from all time lows
Cash annuity offer 14% more income
Purchased life annuity better value Purchased life annuities offer 14% more income than pension annuity
Impaired annuities rise with higher yields
Impaired annuities up 1.5% Impaired annuity rates from providers rise 1.5% with prospect of Brexit deal
Gilt yields rise and Trump delays tariff
Yields recover from all time low

Yields recover from a low as Donald Trump considers limited trade deal with China

  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. Website security issued by GeoTrust and Equifax. Copyright©2001-20 All Rights Reserved