Annuity rates decrease due to investor fears over Omicron variant

15-year gilt yields chart - Based on figures for November 2021

Annuity Rates UK - November 2021 review

Annuity rates decrease up to -4.8% from providers as gilt yields reduce 25 basis points after investors seek safe havens due to the fears over the Omicron variant.

The new Covid variant Omicron found in South Africa and spreading fast to over 30 countries is creating concern with investors and the 15-year gilt yields has reduced from a high of 1.22% on 3 November to 0.97% by the end of the month.

Yields were expected to rise in December through to 2022 as the Bank of England intends to raise base rates. This may be delayed with more travel restrictions due to rising numbers of Covid cases and the possible impact on the economic recovery.

Find related news here:
Pension annuities could fall over 1pc with new Covid variant Omicron
Bank of England could raise base rates sending gilt yields higher

Providers of standard annuities decreased annuity rates by an average of -1.61% for this month and we would expect rates to fall by -0.19% in the medium term if yields remain at current levels.

For smoker and enhanced annuity providers have decreased their rates by an average of -0.37% and we would expect rates to fall by -1.43% in the medium term if yields do not fall.

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   15%   17%   68% Increases of: max 3.0%   Decreases of: max -4.8%

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