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

22 March 2021 last updated

Pension annuities rise 3.2pc as investors sell gilt and bonds
Pension annuities rise 3.2%
  Gilt yields increased by 60 basis last month and annuity rates could increase a further 2.75%
  More annuity topics
  First half 2021 news
  News & articles
  Archive news stories
  Flexi-access drawdown
  Annuity rates tables
  Outlook for 2022
  Annuity rates charts
  15-year gilt yields
  Latest annuity rates

Pension annuities increased by 3.2% responding strongly to 15- year gilt yields currently at 1.21% as investors sell gilt and bonds fearing higher inflation as economies recover from the pandemic.

Providers have increased our benchmark annuity rate for a 65 year old investing £100,000 for a single life, monthly advanced and level basis by £153 pa from £4,786 pa to £4,939 pa.

This means annuities could rise further by another 2.75% if gilt yields remain at current levels. The 15-year gilt yields have increased significantly from 0.54% at the beginning of February 2021 to a high of 1.24% on 18 March a rise of 70 basis in just over six weeks.

Annuity rates are mainly based on the 15-year gilt yields as providers will increase rates to reflect the current market conditions as are shown in the chart below.

Gilt yields and annuity rates

Fig 1: Chart comparing standard annuity rates and 15-year gilt yields

Investors have been concerned with the prospect of higher inflation in the future as the global economy recovers from the pandemic and people return to spending. The price of gilts reach a high in March 2020 when yields reduced as low as 0.16% before returning to about 0.50% for much of last year.

Inflation increases the yield on other investment types and investors looking for a better return are rotating away from gilts. There is also the fear of a fall in gilt values although gilts and bonds are seen as a safe haven in a volatile global economy and are likely to return.

Find related news here:
Annuities set to rise 3pc as yields boosted by higher inflation forecast
Annuity rates higher as investors more optimistic for the economy

The chart is based on our benchmark example of a person aged 65 year old with a £100,000 fund. In January 2020 retirement income recorded the second lowest month ever of £4,786 pa for a single life, level basis for an annuity. This has increased 3.2% or £153 pa to £4,939 pa, the highest since February 2020 just before the covid-19 lockdown.

In terms of total income during their life, the Office of National Statistics (ONS) would expect a male to live for 18.5 years and he will have £2,830 more over his lifetime. For a female she can expected to live for 20.9 years increasing her lifetime income by £3,197.

There does appear more room for providers to increase pension annuity rates over the next few months by a further 2.75% if gilt yields remain at current levels of 1.21%.

Compared to June 2020 last year, 15-year gilt yields have increased 8.10% whereas annuity rates are up by only 2.36%. This suggests providers have scope for a rise of 5.74%, however, it is likely yields will fall back and adjustments made in the short term.

The direction for gilts and hence annuities, would depend on investor expectation of inflation going forward, the speed of the vaccination around the world and the actions of central banks, such as the Federal Reserve and the Bank of England, regarding raising base rates.

News related stories:
Annuity rates could rise as gilt yields bounce back with vaccine results
Annuities at risk with volatile gilts due to Covid-19 restrictions in Europe
Fear of new Covid-19 restrictions in Europe sends gilt yields lower
Annuity Rates
  Age Single Joint  
  55 £4,574 £4,142  
  60 £4,961 £4,610  
  65 £5,691 £5,238  
  70 £6,478 £6,098  
£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 rise due to inflation fears
Gilt yields rise over 2pc 15-year gilt yields are up 28 basis points as investors expect rise in base rates
Annuity rates soar 19pc to high for 6 years
Annuity rates soar19% Annuity rates reach a six year high up 19% since January 2021 as gilt yields rise
Gilt yields rise 20 basis points
Gilt yields rise 20 basis points Federal Reserve to raise rates more aggressively with gilt yields up to 1.82%
Annuities are at a 3 year high
Pension annuities could fall with Omicron variant Higher gilt yields sends annuities to a three year high up 11.1% in the last year
Pension annuities rise 9pc over a year
Pension annuities rise 9pc Pension annuities rise almost 9pc as yields increase ahead of higher base rates

  Follow Us:
You can follow the latest annuity updates on Twitter or as a fan on Facebook
  Facebook Page Twitter Page   This website is for marketing purposes only and does not provide specific financial or legal advice. Website security issued by GeoTrust and Equifax. Copyright©2001-22 All Rights Reserved