Annuity rates reduce by impaired provider

Impaired annuity provider Just Retirement has reduced their rates by up to 4% to bring the market in-line with changes in gilt yields over the last year.

As providers of enhanced and impaired annuities dominate the conventional annuity market by offering lifestyle rates any change in their rates can have a wide ranging impact on all rates.

The 15-year gilt yields were up by 4 basis points on the month as investor confidence returns to the equity markets and a lower demand of the safety of gilts and bonds.

Standard providers decreased rates by 3.94% and we would expect to see annuities remain the same in the medium term. Smoker and enhanced annuity providers decreased their rates by 3.35% on average and in the medium term rates may fall by 0.70%.

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   1%   0%   99% Increases of: up to 0.5%   Decreases of: up to 5.8%

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

15-Year Gilt Yields - March 2016   Tues 1st Wed 2nd Thurs 3rd Fri 4th   1.98%   0.06 2.00%   0.02 1.96%   0.04 2.02%   0.06 Mon 7th Tues 8th Wed 9th Thurs 10th Fri 11th 2.03%   0.01 1.93%   0.10 2.00%   0.07 2.04%   0.04 2.06%   0.02 Mon 14th Tues 15th Wed 16th Thurs 17th Fri 18th 2.05%   0.01 2.04%   0.01 2.04% 1.98%   0.06 1.98% Mon 21st Tues 22nd Wed 23rd Thurs 24th Fri 25th 2.00%   0.02 1.99%   0.01 1.98%   0.01 2.00%   0.02   Mon 28th Tues 29th Wed 30th Thurs 31st     1.98%   0.04 1.99%   0.01 1.96%   0.03

Fig 2: Daily 15-year gilt yields and changes