Annuities improving from a low level

Standard annuity rates reached an all time low in January 2013 with our benchmark example for a person aged 65 with a fund of £100,000 buying a single life, level annuity paid an income of £5,373 pa.

Annuities recovered to £6,196 pa by November 2013 after the US Federal Reserve announced it was ending quantitative easing. Rates started to decline after this point as the European Central Bank (ECB) launched their €1.1 trillion quantitative easing programme which buys €60 billion of bonds per month into the Eurozone.

The latest low was reached in March 2015 when our benchmark example was at £5,485 pa as the 15-year gilt yields failed to recover significantly from the all time low level of 1.68% in January 2015.

Despite yields recovering providers have been reluctant to increase annuities, possibly due to the implementation of new pension rules from April 2015.

People retiring will welcome the improvement and for a 65 year old with a fund of £100,000 buying a single life, level annuity the income has increased by £254 pa to £5,738 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 £4,394 more over his lifetime. For a female she can expected to live for 20.4 years increasing her income by £5,181.