Annuity Rates, Annuities, Pensions, Divorce Free Fixed Term Quote
Home News Annuity Rates Annuities Pension Annuity Impaired Annuity Annuity Quotes Pensions Divorce Resources
 

23 October 2013 last updated
Retirement annuities to benefit earlier when BoE raise interest rates

The Bank of England has indicated that interest rates may rise sooner than expected as the economy continues to improve faster than expected which would see gilt yields rise to the benefit of retirement annuities.

The Governor of the bank of England Mark Carney launched their "forward guidance" policy to freeze interest rates at 0.5% until mid 2016 allowing investors scope to plan for the future.

The trigger for lower interest rates would be unemployment reaching 7.0%. They are at 7.7% now and this is down from Carney's announcement on forward guidance in September when it was at 7.8%.

At that time annuities gained as the market defied the BoE by selling bonds and gilts expecting interest rates to rise after improving manufacturing and service data. As annuity rates are mainly based on the 15-year gilt yields the lower price improved yields with providers quickly increasing rates ending the month 2.28% higher.

 
Retirement annuities to benefit from rising interest rates
  Bank of England indicates rise in interest rate is possible which would increase annuity rates
  More annuity topics
  October News 2013
  News & articles
  Archive news stories
  Flexi-access drawdown
  Annuity rates tables
  Outlook for 2016
  Annuity rates charts
  15-year gilt yields
  Latest annuity rates
 
Retirement annuities ahead of yields this year

From the second quarter of the year both standard and impaired annuities have displayed robust improvements in rates rising aggressively after a slow start to the year.

A significant end to 2012 due to the EU Gender Directive absorbed considerable amounts of retirement annuity business earlier depressed rates in early 2013 but competition has placed rates ahead of yields. For example, compared to the end of last year annuity rates are higher by 10.9% whereas the 15-year gilt yields are higher by 7.2% suggesting rates have a further 3.7% to fall.

This is unlikely to happen in the short term as long as yields remain above the 3.0% level and this depends on economic factors, mainly in the US and UK.

Bank of England buoyant on UK growth

With sterling strengthening the Monetary Policy Committee (MPC) would expect to see inflation lower and to date it have been above the 2% target since december 2009 and currently at 2.7%.

Manufacturing continued to expand with the purchasing manager index (PMI) at 56.7 in September down from a 19-year of 57.1 in August. The services sector also expanded with a PMI of 60.3 in September again slightly lower than August at 60.5.

Interest rates remain at 0.5% and the intension is to leave them there until 2016 but if the UK economy improves at the current growth rate of 3-4% per annum with falling unemployment the Bank of England may consider raising interest rates earlier.

The markets are expecting interest rates to rise in 2015 and had driven yields to a high of 3.38% in September along with the expectation that the US stimulus would start to be tapered. The delay of tapering has brought uncertainty to the market and with the US debt ceiling crisis resulting in a partial government shutdown there is likely to be a knock on effect with for US growth.

For the moment the market seems to be in a neutral position with no particular direction with the 15-year gilt yields hovering at 3.02% awaiting more direction from policymakers in the US and UK.

Buying annuities better value than start of year

For people retiring the market for annuities remains strong having recovered from all time lows in January 2013 and coupled with rising equity markets.

For example for a person aged 65 with a fund of £100,000 could have purchased an income from a single life, level annuity of £5,373 pa in January 2013. A combination of rising equities would have increased the fund to £106,341 with higher annuity rates the income would now be £6,400 pa, an increase of 19.1% or £1,027 pa.

In terms of lifetime income, the Office of National Statistics (ONS) would expect a male to live for 17.3 years and he will have £17,767 more over his lifetime. For a female she can expected to live for 20.4 years increasing her income by £20,950.

News related stories:
Annuities boost as market defies Bank of England rate freeze
Pension annuity income risk as Bank of England may start QE again
Retirement annuities threat as yields fall on UK and US stimulus plans
Related internet links:
BBC - Bank of England points to improving economic picture
Guardian - Interest rates may rise next year says Bank of England
Yahoo - Bank of England Hints of earlier interest rate rise
Annuity Rates
  Age Single Joint  
  55 £4,066 £3,782  
  60 £4,544 £4,240  
  65 £5,246 £4,794  
  70 £6,045 £5,433  
£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:

Pension freedoms help raise fund sizes
Pension freedoms help funds soar to £50,000 Pension fund sizes reach 50,000 with a little help from pension freedoms
Pension freedoms tax receipts at 1.5bn
Pension freedoms tax receipts are £1.5bn Pension freedoms have raised more tax for the HMRC than expected
Best annuities rise 10% since August
Best annuities recover over 10% Providers have increased best annuity rates 10% as gilt yields recover
Annuity sales market scrapped
Second hand annuity market scrapped The second hand pension annuity market has been scrapped by government

  Follow Us:
You can follow the latest annuity updates on Twitter or as a fan on Facebook and Google+
  Facebook Page Twitter Page Twitter Page
Sharingpensions.co.uk   This website is for marketing purposes only and does not provide specific financial or legal advice. Website security issued by GeoTrust and Equifax. Copyright©2001-17 Sharingpensions.co.uk. All Rights Reserved