Pension annuities reduce by 3pc as gilt yields remain volatile

15-year gilt yields chart - Based on figures for October 2023

Annuity Rates UK - October 2023 review

Providers reduced pension annuities by -3% even though the 15-year gilt yields reach a fifteen year record high of 5.13% as central banks state interest rates will remain higher for longer.

Gilt yields may have reached a plateau as volatility in October 2023 produced a 45 basis point range from 4.68% to 5.13% and ended the month 8 basis points higher.

Central banks did not increase interest rates in September even though interest rates remain high suggesting there are fewer increases expected. This could mean yields are lower in the future and as annuities are mainly based on the 15-year gilt yields providers may reduce rates further.

Find related news here:
Annuity rates reduce as gilt yields reach a record 5.13pc high
Gilt yields rise to 4.8pc as interest rates to remain higher for longer

Our benchmark example for a 65 year old using £100,000 to purchase a single life and level annuity remains at a fourteen year high although if has decreased by -4.61%.

Providers of standard annuities decreased annuity rates by an average of -2.98% for this month and we would expect rates to rise by +3.78% in the short term if yields remain at current levels.

For smoker and enhanced annuity providers have increased their rates by an average of -1.81% and we would expect rates to increase by +2.61% in the short 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   16%   2%   82% Increases of: max 2.6%   Decreases of: max -5.3%

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