Annuity rates increase 15pc as Mini Budget sends yields to record levels

15-year gilt yields chart - Based on figures for September 2022

Annuity Rates UK - September 2022 review

Providers increase annuity rates by almost 15% on average during September 2022 after gilt yields rise a record amount following the government's the Mini Budget on 22 September 2022. Pension annuities for those aged 55 buying a 50% joint life annuity with 3% escalation increased by over 25% in the month.

At one time the 15-year gilt yields were up 177 basis points from 3.19% to 4.96% near record levels over fourteen years. Investors sold gilts as they were unconvinced about the £45 billion cost of unfunded tax cuts from the government.

Only intervention from the Bank of England on 28 September 2022 to buy gilts halted the record -73 basis points fall in yields before rising to 4.24% for the month.

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Providers of standard annuities increased annuity rates by an average of 14.95% for this month and we would expect rates to rise by 0.70% in the medium term if yields remain at current levels.

For smoker and enhanced annuity providers have increased their rates by an average of 14.72% and we would expect rates to rise by 2.49% in the medium term if yields do not fall.

Previous record increases for annuities in June 2022 may mean providers are more conservative about raising annuity rates in September.

Fig 1 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 of the changes of the annuity rates over the last month:

Annuity Rates Changes Increase No change Decrease   100%   0%   0% Increases of: max 25.1%   Decreases of: max -0.0%

Fig 1: Annuity rate changes for the whole market

Fig 2: Change in standard rates last month compared to gilt yields

Fig 3: Change in enhanced rates last month compared to gilt yields