Annuity rates UK is a free guide to find the best annuity rates for you with up to 25% more income for a standard annuity. Compare this to a fixed term or flexible income annuity and use the FREE annuity quote service for even higher rates if you are a smoker or up to 40% more income for impaired health.
Read the latest daily updates on annuity rates and gilt yields that can help you make the best decision about when to buy your annuity. Timing could make a 20% difference to your income, up or down so make sure you read this review.
Your lifetime income depends on your pension fund size, annuity rates and price changes of the 15-year gilt yields so the timing of your annuity purchase can make a significance difference to your income.
Make sure you read our January 2012 review of annuity rates and gilt yields as well as using our quotes to compare the best annuity rates now and see if this is best time for you to buy your annuity. Find out more from the following sections.
Annuity Rates Table - Standard Last reviewed: 31st January 2012
Table 1 below shows standard annuity rates are for a pension of £100,000 after the
tax free lump sum of £33,333 has been taken. Rates for males, females and joint life basis are shown. These rates are based on a central London postcode and other areas in the UK, such as Peterborough or Liverpool could be up to 4% higher or Dundee and Newcastle could be 5% higher.
Male Standard Annuity Rates
Age
Level rate
no guarantee
Level rate +
10-year guarantee
3% escalation
no guarantee
Male 55
£5,037
£5,005
£3,196
Male 60
£5,460
£5,411
£3,650
Male 65
£6,015
£5,932
£4,230
Male 70
£6,835
£6,664
£5,072
Male 75
£8,143
£7,726
£6,324
For annuity rates for your needs, ask for a quote today
Female Standard Annuity Rates
Age
Level rate
no guarantee
Level rate +
10-year guarantee
3% escalation
no guarantee
Female 55
£4,825
£4,807
£3,003
Female 60
£5,183
£5,159
£3,402
Female 65
£5,731
£5,679
£3,927
Female 70
£6,533
£6,411
£4,733
Female 75
£7,682
£7,388
£5,886
For annuity rates for your needs, ask for a quote today
Joint Standard Annuity Rates
Age
Level rate +
50% Joint Life
Level rate +
100% Joint Life
3% escalation +
50% Joint Life
Joint 55
£4,747
£4,495
£2,917
Joint 60
£5,092
£4,784
£3,305
Joint 65
£5,549
£5,169
£3,800
Joint 70
£6,220
£5,719
£4,447
Joint 75
£7,276
£6,580
£5,512
For annuity rates for your needs, ask for a quote today
Table 1: Standard annuity rates on a single and joint basis for January 2012
Table 1 Notes: Annuity rates based on a central London postcode (other locations in the UK can offer rates 4% or 5% higher) using a purchase price of £100,000 - this assumes an original pension fund of £133,333 and after the
tax free lump sum of £33,333 has been taken. Income is gross per year (before deduction of tax) and payable monthly in advance for the whole of the annuitant's life. No medical enhancements are included in these rates. The annuity rates table is only a guide as rates
change frequently.
Annuity Rates Review - January 2012 Last reviewed: 31st January 2012
This review is by Colin Thorburn the founder of sharingpensions.co.uk who has eighteen years experience in financial services and is a specialist in pensions and annuities.
Annuity rates during December 2011 for standard rates have increased on average by 1.08% and for smoker rates have decreased on average by 1.07%. This is based on all male, female and joint annuitants aged 55 to 75 and with three types of annuity features selected, level, level with a 10 year guaranteed period and 3% escalation.
For information about these changes the latest annuity rates for December 2011 has a report on these details. The 15-year gilt yields reduced by 24 basis point down to 2.46% for December and for the start of 3rd January 2012 were up 5 basis points at at 2.51%.
Fig 1 below shows the annuity rates over the last 12 months and the rate for January 2012 to date:
Annuity Rates for £100,000, male, age 65, single, level
Latest rate:
1 month change:
1 year change:
£6,015 pa
£0 / 0%
£575 / 8.7%
Fig 1: Latest annuity rates chart for 12 months to January 2012
Our benchmark example that uses a central London postal code (other areas in the UK would have incomes up to 5% higher than those shown) shows annuity rates have increased by 0.7% or £43 pa to £6,015 pa at the end of december 2011 which was the first rate change since 14th November 2011. Over one year annuity rates have the decreased £537 pa or down 8.2%.
Fig 2 below shows the change in annuity rates over 7 years compared to the current annuity rate for January 2012:
Annuity Rates Changes for £100,000, male, age 65, single, level
Latest rate:
6 month change:
3 year change:
£6,015 pa
£576 / 8.7%
£1,378 / 18.6%
Fig 2: Latest annuity rates changes for January 2012
Fig 2 chart above shows that the annuity rate for December has not changed compared to the annuity rates for November. It is £576 pa less than six months ago and £78 pa less than three months ago. Compared to longer term rates, December latest annuity rates are £1,378 pa or 18.6% lower than 3 years ago and £1,233 pa or 17.2% lower than 7 years ago.
These decreases are significant because if pensions are invested in equities since 30 June 2011 the FTSE-100 index is down 5.8% and annuity rates 11.6% as at 6th January 2012. This means that in June 2011 a male pensioner aged 65 with £100,000 could purchase an income of £6,806 pa. However, seven months later in January 2012 annuity rates and equities have fallen with a maximum income from the pension fund of £5,793 pa resulting in a reduction in income of £1,013 pa or 14.8%. This is the effect of reduced pension annuity rates and fund value occurring at the same time.
Outlook for January 2012
Mon 30th Jan 2012
Eurozone crisis pushes markets and gilt yields lower
20:51: The markets closed lower today with the FTSE-100 index down 62 points or 1% at 5,671 and markets in europe also down between 1% and 2%. Concern continued with Greece unable to reach an agreement with their creditors despite the optimism before the weekend. The decision on Friday by rating agency Fitch to downgrade the debt of five Eurozone countries as well as the yield on a 10-year Portuguese bond increasing to record levels of 17.3% yield today has also helped to push markets lower. Portugal has already received 78 billion euros from the International Monetary Fund (IMF) and may need a further bailout.
This has resulted with investments seeking safer havens such as UK government bonds with gilt yields falling and the 15-year gilt yield is lower by 7 basis points at 2.46%. The 15-year gilt yields have reduced four days in a row from 2.63% to their current level representing a 17 basis point reduction. This would roughly mean a fall in annuity rates of 1.7% however as yields improved strongly the week before it effectively negates any of this benefit. Currently January is ending at the same gilt yield as it started although for annuity rates the decrease in gilt yields for December have not been fully accounted. This suggests that the latest annuity rates have further to fall in February and this could be further reduced with the start of Quantitative easing that the Bank of England will start again with £75 billion. For standard, smoker and impaired annuity rates have not changed today.
The EU summit in Brussels has ended this evening with 25 out of the 27 counties agreeing to a fiscal treaty which will force the members to adhere to a strict budget policy with only the UK and Czech Republic refusing to join. Even though the treaty is designed to promote austerity measures EU members have also discussed measures to stimulate growth with 82 billion euros available for countries to improve job prospects and counter the 23 million unemployed in the European Union.
Equity markets:
The level of equities has a direct impact on the value of many pensioners that still have these investment at retirement. The FTSE-100 index is down by 5.4% since reaching 6,000 on 30 June 2011 compared to the 5,671 level on 30th January 2012. This is an improvement since the FTSE-100 index reached a low of 4,944 on 4th October 2011 and pensioners should consider converting their equity funds to cash to avoid volatility if they are looking at taking their annuity. Transferring funds can often take one month or more through the open market option to a new provider and there is always the risk of equity funds reducing suddenly.
15-year gilt yields:
The range for gilt yields in December 2011 was from 2.44% to 2.75% which is 31 basis points and is less volatile than previous months. The 15-year gilt yields finished at 2.46% or down 24 basis points and this would represents a change in annuity rates of 2.4% across the board. However, annuity rates have not matched the drop in gilt yields and there is now a discrepancy which means annuity rates are likely to reduce if gilt yields do not continue to increase in January. Other risk in the short term are from the Eurozone as well as Quantitative Easing and on 30th January 2012 they are at 2.46%.
Annuity rates 2012:
For December 2011 43% of annuities increased and 48% decreased with 9% remaining unchanged. The increase came from standard annuity rates with an average rise of 1.08% in December 2011 and the decrease from smoker annuity rates with an average decrease of 1.07% in December 2011.
The significant increases were from Canada Life and Legal & General and the decreases for smoker rates from Liverpool Victoria and Just Retirement. There have been a continuous reduction in annuity rates from the impaired health providers such as Liverpool Victoria, Just Retirement, Partnership and MGM Advantage. These decreases have usually been about 0.75% across the board and up to 3% for some specific medical conditions. On 23rd January Legal & General reduced their annuity rates by 1-2% and Aviva reduced their annuity rates by 2-7%.
What next for annuity rates:
Annuity rates have not accounted for the gilt yield reductions of 24 basis points in December 2011. For standard annuity rates in February a 2.40% Decrease in Annuity Rates can be expected. As gilt yields are level at the moment and similar to gilt yields for December, for smoker annuity rates a 1.33% Decrease in Annuity Rates can be expected.
These changes to the latest annuity rates would need the gilt yields to remain consistently at 2.56% for a change to occur across the board.
In addition annuity rates are expected to fall with The Bank of England plan for £75 billion of Quantitative Easing to start in February 2012 and this is likely to force gilt yields lower and annuity rates will also reduce towards the end of February and into March 2012. Further QE of £100 billion is planned for later in 2012. Other factors due the impact is the continuing Eurozone debt crisis, Solvency II in December 2012 and unisex rates in January 2013.
Rates for 2013-2015:
Annuity rates are likely to reach a low during 2012 and beyond this an improving economy would mean interest rates returning to more normal levels followed by gilt yields. Improving gilt yields would mean annuity rates would increase but this prospect would depend on global economic improvements.
Review & Outlook Archives:
More on annuity rates, changes and events from previous months.
Gilt yields and in particular the 15-year gilt yields are an important indicator of the likely direction for annuity rates and the general rule is a 50 basis point change (or 0.50% change in the actual yield) results in a 5.00% change in annuity rates.
For December 2012 the 15-year gilt yields reduced by 24 basis point which means the standard rates would be reduced by about 2.4% for the month. Standard annuity rates have increased by an average of 1.08% for December which suggest that based on one month they need to reduce by 3.48%. Over two months the they have reduced by 1.19% which suggest that pension annuity rates will decrease by 3.21%, so a range of 3.2% to 3.5% decrease could be expected if gilt yields do not increase.
Smoker annuity rates decreased by 1.07% on average in December and over two months they have decreased by 3.2%. This suggests that over one month smoker rates will decrease by 1.33% and over two months they will decrease by 1.2%, so a range of 1.2% to 1.33% decrease could be expected.
At the beginning of January 2012 providers are not follow gilt yields as there are many other factors they are considering such as internal targets for a certain amount of annuity business for the period or competition between the providers.
Fig 4 below shows the change in 15-year gilt yields over the last 12 months and the current rate for January 2012:
15-Year Gilt Yields over 1 year
Latest yield:
1 month change:
1 year change:
2.46%
0.00%
1.75%
Fig 4: 15-year gilt yields chart showing rates to January 2012
Fig 4 above shows the 15-year gilt yields have reduced sharply since 30 June 2011 when they were at 3.98% finishing at 2.46% on at the end of December 2011, a reduction of 152 basis points compared to our benchmark example standard annuity rates fall of 11.6%. Our benchmark annuity rates should have reduced by 15.2% over this period and this indicates a likely decrease in the latest annuity rates can be expected of approximately 3.6%.
At the start of January 2012, annuity rates had not accounted for the gilt yield 24 basis points reduction with the standard annuity rates increasing by 1.08% means if gilt yields remain the same a 3.48% reduction in annuity rates can be expected in January 2012. For smoker annuity rates a decrease of 1.07% means a 1.33% reduction in annuity rates can be expected.
The range for 15-year gilt yields during December was from 2.44% to 2.75% which is 31 basis points and not as volatile as October which exhibited an 84 basis point change during that month. Gilt yields have continued to fall in 2011 due to continued concern over the Eurozone debt crisis although equities finished the year strongly which will help pensioners still invested in equities receive a higher income than expected.
Fig 5 below shows the daily 15-year Gilt Yield and the increase or decrease from the previous day's close:
15-Year Gilt Yields - January 2012
Mon 2nd
Tues 3rd
Wed 4th
Thurs 5th
Fri 6th
2.51%
0.05
2.52%
0.01
2.51%
0.01
2.48%
0.03
Mon 9th
Tues 10th
Wed 11th
Thurs 12th
Fri 13th
2.46%
0.02
2.52%
0.06
2.46%
0.06
2.48%
0.02
2.42%
0.06
Mon 16th
Tues 17th
Wed 18th
Thus 19th
Fri 20th
2.42%
2.41%
0.01
2.40%
0.01
2.50%
0.10
2.56%
0.06
Mon 23rd
Tues 24th
Wed 25th
Thurs 26th
Fri 27th
2.63%
0.06
2.63%
2.61%
0.02
2.55%
0.06
2.53%
0.02
Mon 30th
Tues 31st
2.46%
0.07
Fig 5: Daily 15-year gilt yields and changes
Fig 5 above shows gilt yields started January 2012 at 2.46% which is a reduction of 24 basis point from the start of December. This should translate to roughly a 2.4% reduction in annuity rates and providers have not followed the gilt yields by the start of January suggesting decreases in annuity rates can be expected.
Get the Best Deal for your Pension A pension annuity can be a fantastic way to ensure a pleasant retirement, and by comparing annuity rates it is possible for you to increase your pension income by up to 25%.
Being financially prepared for retirement is extremely important for you to live a comfortable and secure life and to ensure such an existence many people choose to buy a pension annuity. It is important to remember that this is an investment that has to last you for the rest of your life, so comparing annuity rates is highly advisable before you make your choice.
What do Rates Depend On? There are a number of different factors that annuity rates depend on. For instance, the rates for a man and a woman will be different, as mortality rates differ between males and females. Other factors that annuity rates are dependent on include the following:
• Smoker/non smoker – rates can vary significantly between smokers and non smokers
• Illness – illness is another thing that can have a noticeable effect on annuity rates
• Care needs – annuity rates can also be affected if an individual has immediate needs such as care homes
• Impaired health
• Diabetes
Because annuity rates can differ so much it is essential to compare annuities on the market to find one that will suit your requirements, and you can do that here at Sharing Pensions.
