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


3 August 2017 last updated

UK annuity rates likely to fall as Bank of England cuts growth prospects

UK annuity rates are likely to fall as the 15-year gilt yields reduce by 8 basis points following the Bank of England downgrade of growth prospects and holding interest rates.

Governor Mark Carney of the Bank of England said interest rates are to remain at 0.25% and the Bank has downgraded the UK growth forecast by 0.2% down from the previous 1.9% to 1.7% for 2017 and 2018.

The Monetary Policy Committee (MPC) expects inflation to rise to about 3% in the next few months due to the fall in sterling increasing prices for consumers.

Investors are seeking safe havens of bonds and gilts with yields falling by 8 basis points to 1.51% pressuring UK annuity rates.

As annuities are mainly based on the 15-year gilt yields an 8 basis point fall would likely see a 0.8% fall in rates from the providers.

The pound has also reduced by 0.8% against the dollar although the FTSE-100 index increased 64 points to 7,474.

 
UK annuity rates likely to fall
  Bank of England downgrades UK growth prospects resulting in an eight basis point fall in yields
  More annuity topics
  Quarter 3 News 2017
  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 decrease last month

During July the 15-year gilt yields reached a high of 1.68% following signals from the European Central Bank (ECB) that cheap money from the €1.1 trillion quantitative easing programme was coming to an end.

Yields reduced to 1.59% towards the end of the month after the US Federal Reserve delays increasing interest rates due to weaker than expected inflation. In addition investors have doubts over President Donald Trump’s pro-growth policy agenda with funds moving to bonds and gilts sending yields lower.

  Benchmark annuity rates and gilt yields
  Jan Feb Mar Apr May Jun Jul
Rate £5,394 £5,246 £5,187 £5,108 £5,272 £5,433 £5,370
Yield 1.79% 1.50% 1.49% 1.46% 1.43% 1.62% 1.59%


The above table shows 15-year gilt yields are lower by 3 basis points and for our benchmark example of a 65 year old buying a single life, level annuity with a fund of £100,000 the income has decreased from £5,433 pa at the end of June to £5,370 pa at the end of July.

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 £1,089 less over his lifetime. For a female she can expected to live for 20.4 years decreasing her lifetime income by £1,285.

Now with gilt yields reducing further to 1.51% annuities are likely to fall further in August.

Interest rate rise will be slow

The MPC voted 6-2 in favour of keeping interest rates and quantitative easing unchanged but signaled that they were likely to rise within a year.

All members agreed that any increases in the base rate would be expected to be at a gradual pace and to a limited extent.

Governor Mark Carney said tightening of monetary policy would be necessary in the next three years and two or more increases in interest rates were likely.

Bank of England has an inflation target of 2% set by the government and the MPC expects inflation to reach 3% by October 2017 before reducing to 2.2% by 2020.

This increase in inflation would usually result in a rise in base rates followed by a rise in gilt yields and annuity rates. However, the Bank must take account of the wider economy which is set to slowdown following Brexit and the recent rise in inflation is temporary.

UK annuity rates will continue to be influenced by decisions made by the Federal Reserve, European Central Bank and Bank of England and are likely to decrease in the short term by no more than 1.0%.

News related stories:
Pension annuities set to rise as central banks signal end of QE
Annuities are lower after Brexit vote and Bank of England action
Retirement annuity rates could fall as Bank starts more QE
Pension annuity rates to reduce as ECB starts €1.1 trillion stimulus
Related internet links:
Telegraph - Bank holds interest rates and cuts growth forecast
Moneywise - Bank of England holds interest rates at 0.25%
 
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
Sharingpensions.co.uk   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 Sharingpensions.co.uk. All Rights Reserved