This is a free guide to find the best standard annuity rates for you with up to 25% more income for the new Unisex annuity rates on a gender neutral basis. Use the FREE annuity quote service to compare this to a fixed term or flexible income annuity, a higher pension income if you are a smoker or up to 40% more income for impaired health.
Read the latest daily updates on annuity rates and gilt yields that can help you make the best decision about when to buy your annuity. Timing could make a 20% difference to your income, up or down so make sure you read this review.
Your lifetime income depends on your pension fund size, annuity rates and price changes of the 15-year gilt yields so the timing of your annuity purchase can make a significance difference to your income.
The new Unisex rates on a gender neutral basis are shown applying from 21 December 2012. This means that male and female rates are now the same. Make sure you review of annuity rates and gilt yields as well as using our quotes to compare the best annuities now and see if this is best time to take your pension benefits. Find out more from the following sections.
Unisex Annuity Rates Table - Standard 14 May 2013 last updated
Table 1 below shows standard annuity rates adjusted for the new Unisex rates on a gender neutral basis applying from 21 December. It assumes a pension fund of £100,000 after the
tax free lump sum of £33,333 has been taken from the full fund of £133,333 for males, females and joint life basis are shown. These annuities are based on a central London postcode and other areas in the UK, such as Peterborough or Liverpool could be up to 4% higher or Dundee and Newcastle could be 5% higher.
Single Standard Basis
Level rate +
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Joint Standard Basis
Level rate +
50% Joint Life
Level rate +
100% Joint Life
3% escalation +
50% Joint Life
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Table 1: Standard pension annuity on a single and joint basis for May 2013
Table 1 Notes: Annuity rates based on a central London postcode (other locations in the UK can offer annuities 4% or 5% higher) using a purchase price of £100,000 - this assumes an original pension fund of £133,333 and after the
tax free lump sum of £33,333 has been taken. Income is gross per year (before deduction of tax) and payable monthly in advance for the whole of the annuitant's life. No medical enhancements are included in these annuities. The pension annuity table is only a guide as annuities
change frequently. Figures shown have been adjusted for Unisex annuity rates on a gender neutral basis.
Last month annuity rates market experienced increases of 26% of annuities reducing, 49% decreasing and 15% remaining unchanged. Standard annuities decreased by an average of 0.33% and smoker rates decreased by on average of 0.02%. This is based on all single and joint annuitants aged 55 to 75 and with three types of features selected, level, level with a 10 year guaranteed period and 3% escalation. Our monthly analysis of annuities has a review on these details.
Annuity rate changes are closely linked to the 15-year gilt yields and over the past month these have reduced by 11 basis points and as a rough guide this would translate into a 1.1% fall in annuity rates. In the short term this would suggest that standard annuities could decrease by 0.77%. However, over the medium term such as three months gilt yields have decreased by 38 basis points and standard rates have increased by 2.12% and this suggests that standard rates could decrease in the medium term by about 5.92%.
For lifestyle enhanced and smoker annuities the change over the last month is a decrease of 0.02% suggests rates could decrease by 1.08% over one month. Over three months rates are up 0.78% compared to yields down 38 basis points suggesting lifestyle enhanced and smoker annuities could decrease by 4.58%.
Impaired annuity rates remain volatile with providers decreasing annuities and changing the pricing and margins on different medical conditions on a regular basis.
Fig 1 below shows the annuity rates over the last 24 months and the rate for April 2013 to date:
The benchmark example uses a central London postal code (other areas in the UK would have incomes up to 5% higher than those shown) and over three months shows an increase in income of £20 pa to £5,625 pa. Over one year pension income has decreased £384 pa or down 7.9%.
Fig 2 below shows the change in annuity rates over 24 months compared to the current annuity rate for April 2013:
Fig 2: Latest pension annuity changes for two years
Fig 2 chart above shows that the annuities are slowly recovering after significant reductions scompared to even months ago or longer. Pension income today is £252 pa higher than three months ago and £177 pa less than nine months ago. Compared to longer term pension income, the latest annuity rates are £1,124 pa lower than 3 years ago and £1,383 pa lower than 7 years ago.
These decreases are significant because if pensions are invested in equities since June 2011 the FTSE-100 index was 6,000 and at the beginning of March 2013 is up 361 points or 6.0% at 6,361. Annuity rates for our benchmark example are down £1,321 per year or 19.4% by March 2013 over this period. In June 2011 a male pensioner aged 65 with £100,000 could purchase an income of £6,806 pa. However, although equities are higher and annuities lower and the maximum income the pensioner could receive from the pension fund is now £5,814 pa resulting with a reduction in income of £992 pa or 14.5% over the last year. This is the effect of reduced pension annuity rates and fund value occurring over this time.
However, compared to 4 October 2011, the FTSE-100 index was 4,944 and now up 28.6% and annuity rates are lower by October 2012. This means that in October 2011 a male pensioner aged 65 with £100,000 could purchase an income of £6,093 pa. However, now in January 2013 equities have increased and annuities are similar with a maximum income from the pension fund of £7,053 pa resulting with an increase in income of £960 pa or 15.7% over the year. This is the effect of increasing fund values occurring over this time.
The following table takes into account the new Unisex annuity rates introduced by the EU Gender Directive on 21 December and where annuities should be in the short term (over one month) although providers can take time to change annuities for marketing reasons:
What Next For Annuity Rates
Expected Change (short term)
1.4% increase possible
1.1% increase possible
2.1% increase possible
The latest annuity rates would need gilt yields to remain consistently at 2.44% for a change to occur across the board.
Volatile gilt yields main see providers resist lowering rates in the short term.
Legal & General increased their standard annuity rates on 23 April by up to 1.5% but decreased their escalating annuities by up to 2.5%. Canada Life increased their annuity rates by between 1.8% to 4.0% from a lower based to compete with legal & General and Aviva.
Impaired annuity providers have resisted increasing their rates apart fom Just Retirement with a 1.0% rise on 7 May. More increases could be made by other providers as gilt yields rise.
Annuities have decreased due to the Cyprus bailout deal and implications of the ECB ability to support soverign debt of member states. The US economy reported the lowest jobs added in the last nine months and this has forced investors to seek safe havens driving down 15-year gilt yields before making a recover in May as equity markets rise.
Pensioners with their funds in equities had benefited from the rising markets and due to decreases in annuities they may hold off purchasing their pension incomes until providers increase rates.
Annuities for 2013-2015:
Annuity rates reached an all time low point in January 2013 with the Unisex Rates being applied. In the long term assuming the UK economy improves with interest rates returning to more normal levels, gilt yields would improve and this would mean annuities would increase although the process could take several years.
Many pensioners remain investment in equities at retirement and changes in the FTSE-100 index can make a significant difference to the pension income they will receive, up or down. The FTSE-100 index reached 6,000 on 30 June 2011 and is currently at 6,625 on 10 May 2013, an increase of 10.4%. The FTSE-100 index has increased 34.0% since the low of 4,944 on 4th October 2011. Purchasing an annuity can often take a month so to protect against volatility in the markets pensioners invested in equities should consider switching their fund to cash to avoid further decreases in their pension fund value or delay purchasing an annuity until the current crisis has stabilised.
15-year gilt yields:
The range for gilt yields last month was from 2.17% to 2.34% or a difference of 17 basis points. Yields have improved since the August low of 2.02% and annuity rates are offering poor value to pensioners.
On 10 May 2013 the 15-year gilt yields were at 2.44%.
Get the Best Deal for your Pension A pension annuity can be a fantastic way to ensure a pleasant retirement, and by comparing annuity rates it is possible for you to increase your pension income by up to 25%.
Being financially prepared for retirement is extremely important for you to live a comfortable and secure life and to ensure such an existence many people choose to buy a pension annuity. It is important to remember that this is an investment that has to last you for the rest of your life, so comparing annuity rates is highly advisable before you make your choice.
What do Rates Depend On? There are a number of different factors that annuity rates depend on. For instance, the annuities will be different as mortality differs for a range of ages. Other factors that annuity rates are dependent on include the following:
• Smoker/non smoker – annuities can vary significantly between smokers and non smokers
• Illness – illness is another thing that can have a noticeable effect on annuity rates
• Care needs – annuity rates can also be affected if an individual has immediate needs such as care homes
• Impaired health
Because annuity rates can differ so much it is essential to compare annuities on the market to find one that will suit your requirements, and you can do that here at Sharing Pensions.