Annuity rates reduce by 1pc as investors expect lower interest rates

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

Annuity Rates UK - June 2025 review

Providers reduced annuity rates by an average of -1.01%, the second month in a row they have reduced rates as gilts yields fall from their peak of 5.29% reached in April this year.

The fall in gilt yields of 14 basis points this month is due to the subsiding threat of President Donald Trump tariffs and investors expect lower interest rates with a further two cuts this year from UK and US central banks.

Our benchmark example for 60 year old using £100,000 to purchase a single life annuity and 3% escalation basis has decreased £151 pa or 2.95% from £5,104 pa since May to £4,953 pa in July 2025.

The 15-year gilt yields remain high closing at 4.90% following the US strike on Iran's nuclear programme and the US Federal Reserve announcing it will hold interest rates at current levels.

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Providers of standard annuities reduced rates by an average of -1.01% this month and we would expect rates to fall by -0.39% in the short term if yields remain at current levels.

For smoker and enhanced annuity providers reduced their rates by an average of -0.65% and we would expect rates to fall by -0.75% 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   10%   3%   87% Increases of: max 1.0%   Decreases of: max 3.2 %

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