Annuities rise as gilt yields exceed 5pc due to UK public finance concerns

15-year gilt yields chart - Based on figures for August 2025

Annuity Rates UK - August 2025 review

The 15-year gilt yields rise as high as 5.21% in August before ending slightly lower up 16 basis points for August at 5.17%.

There is investor concern in the UK about the government's requirement to meet their fiscal rules with £30-50 billion of extra funding needed. The Chancellor must fund this deficit by raising taxes, cutting spending or higher through government borrowing and uncertainty will remain until the Autumn Budget.

Higher gilt yields has helped enhanced annuity rates to rise by +1.76% and standard annuities rise +1.04% despite the Bank of England reduced interest by -0.25% down to 4.00% in August 2025.

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Providers of standard annuities increased rates by an average of +1.04% this month and we would expect rates to rise by +0.56% in the short term if yields remain at current levels.

For smoker and enhanced annuity providers increased their rates by an average of +1.76% and we would expect rates to remain at current levels in the short term if yields do not change.

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   93%   3%   3% Increases of: max 2.9%   Decreases of: max 1.4 %

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