Annuity Rates, Annuities, Pensions, Divorce Annuity Rates Charts
Home News Annuity Rates Annuities Pension Annuity Impaired Annuity Annuity Quotes Pensions Divorce Resources
   


1 May 2015 last updated

Best annuities could rise as Federal Reserve delays raising rates

UK best annuities could increase as gilt yields bounce back following the US Federal Reserve delay in raising interest rates following weaker than expected manufacturing and employment data.

Annuity rates are primarily based on the 15-year gilt yields which have seen a 26 basis point rise in recent weeks. As a general rule this would result in a 2.6% rise in annuities should the yields remain at the current level of 2.22%.

Gilt yields reduced to an all time low of 1.68% on 30 January after the European Central Bank announced the start of their Quantitative Easing with €1.1 trillion for the Eurozone until September 2016.

After the Fed gave no indication of when they would increase interest rates investors dumped US Treasury notes, German Bunds and UK gilts sending the price down and yields up. The reason was less gloomy data from Europe, failure of a German five-year debt auction and over supply of US bonds. Interest rates are expected to rise in December.

 
Best annuities to rise on Fed delays
  Gilt yields increase as Federal reserve delays interest rates rise could see annuity rates higher
  More annuity topics
  Quarter 2 News 2015
  News & articles
  Archive news stories
  Flexi-access drawdown
  Annuity rates tables
  Outlook for 2022
  Annuity rates charts
  15-year gilt yields
  Latest annuity rates
 

Annuities could see a 2.6% increase

Standard annuity rates reached an all time low in January 2013 and our benchmark example at that time for a person aged 65 with a fund of £100,000 buying a single life, level annuity was £5,373 pa.

  Benchmark annuity rates and gilt yields
  Nov Dec Jan Feb Mar Apr May
Rate £5,900 £5,755 £5,506 £5,494 £5,485 £5,507 £5,507
Yield 2.35% 2.15% 1.68% 2.15% 1.96% 2.18% 2.20%


Since the all time low annuity rates recovered by November 2013 to an the income of £6,196 pa as the Federal Reserve announced it would end stimulus package only to reduce again when the European Central Bank (ECB) announced quantitative easing in January.

Annuities have remained low since then even though yields have improved from the all time low level for 15-year gilt yields of 1.68%.

If rates increase by 2.6%, for our benchmark example the income of £5,507 pa would increase by £143 pa to £5,650 pa. In terms of lifetime income, the Office of National Statistics (ONS) would expect a male to live for 17.3 years and he will have £2,473 more over his lifetime. For a female she can expected to live for 20.4 years increasing her income by £2,917.

Fed in a bind over low European yields

Warren Buffett, the chairman of Berkshire Hathaway, has said the US Federal Reserve is caught in a bind. The ECB has introduced quantitative easing sending European yields to an all time low creating a huge yield gap between the US and the EU.

This has resulted in funds flowing into the US debt markets and sending the dollar higher. To a certain extent the Fed cannot act by increasing interest rates as it would simple compound the problem.

As a result of a slack labour market where unemployment appears low at 5.5% but wages struggle to rise, the Fed will be unable to increase interest rates possibly at any time this year.

News related stories:
UK annuities could rise as 15-year gilt yields makes a strong recovery
Pension annuity rates to reduce as ECB starts €1.1 trillion stimulus
Annuities to fall when ECB €1 trillion stimulus plan starts
Pension annuities remain unchanged as Fed stimulus is ended
UK annuity rates unchanged by Fed tapering but interest rates will bite
Related internet links:
Telegraph - New doubts of Fed tightening
Annuity Rates
  Age Single Joint  
  55 £6,361 £5,898  
  60 £6,842 £6,244  
  65 £7,474 £6,843  
  70 £8,405 £7,660  
£100,000 purchase, level rates, standard
Unisex rates and joint life basis
  Annuity Rates  
Annuity Quotes
  Plan your annuity and get quotes from the 12 leading providers  
 
  free annuity quote Free Annuity Quotes
  annuity quote no obligation No Obligation
  annuity quote all providers From All Providers
 
  Annuity Quote  
  Annuity Rates News:

Annuities rise 6% to eleven year high
Annuities rise 6% to 11 year high Annuities rise 6% and gilt yields increase 90 basis points due to central bank action
Gitl yields rise 87 basis points
rise 87 basis points Gilt yields higher as investors shrug off global recession fears as base rates rise
Retirement income at record high
Retirement income soars Retirement income rises by 71.6% as yields and annuities are driven higher
Pension annuities fall on recession fears
Pension annuities fall Pension annuities fall and gilt yields are lower by -27 basis points to 2.32%
Annuity rates rise but yields weaken
Annuity rates rise 7pc last month Annuity rates rise by a record 7% for a single month but gilt yields weaken

  Follow Us:
You can follow the latest annuity updates on Twitter or as a fan on Facebook
  Facebook Page Twitter Page
Sharingpensions.co.uk   This website is for marketing purposes only and does not provide specific financial or legal advice. Website security issued by GeoTrust and Equifax. Copyright©2001-22 Sharingpensions.co.uk. All Rights Reserved