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


22 May 2012 last updated
UK pension annuity income may reduce with lower inflation and QE measures

As UK inflation falls it is likely that the Bank of England will consider QE to stimulate the economy which would also result in lower UK pension annuity rates and income.

The inflation in the UK has reduced and the government has been urged by the IMF to consider fiscal stimulus such as reducing interest rates and Quantitative Easing (QE) in order to boost the economy and lift the UK out of the double-dip recession.

Both these measures would have a significant impact on UK pension annuity income by reducing the yields on gilts. Annuities are based on the 15-year gilt yields and lower interest rates with QE would drive yields lower in the short term.

The Office for National Statistics (ONS) has said that the Consumer Prices Index (CPI) has reduced from 3.5% to 3.0% and the Retail Price Index reduced from 3.6% to 3.5% which is the lowest level of inflation since February 2010.

 
UK inflation to lower pensioner income
 
  More annuity topics
  May News 2012
  News & articles
  Archive news stories
  Flexi-access drawdown
  Annuity rates tables
  Outlook for 2023
  Annuity rates charts
  15-year gilt yields
  Latest annuity rates
 

How QE reduces pensioner income

The Bank of England has set a long term target for inflation of 2.0% and although the current rate of inflation is higher it is decreasing at a rapid rate and could drop below the 2.0% target.

The Bank of England will consider whether it needs to resort to Quantitative Easing which would act to increase inflation by injecting money into the system. The International Monetary Fund (IMF) has urged the UK to consider using QE as part of the measures to boost the economy as well as reducing interest rates.

Quantitative Easing requires the government to purchase UK government bonds and gilts which means investors have additional capital to invest elsewhere thereby increasing the supply of money to the economy. The effect is to increase the price of the gilt and therefore reduce the yield and as UK pension annuity rates are based on the 15-year gilt yields QE will reduce the income an annuity can pay to someone retiring. If the BoE reduces interest rates pensioners with savings will receive even less interest.

Providers reduce annuity rates

Gilt yields have increased slightly today with the 15-year gilt yields increasing to 2.43% up 4 basis points. Despite the increase in gilt yields in the last couple of days providers have reduced annuities with Hodge Life down about 1.0%, Aviva down 0.8% and impaired annuity provider MGM Advantage reducing rates by up to 3.3%. These decreases in annuity rates are delayed reactions to falls in gilts at the beginning of the month.


To counter falling annuities pensioners with health problems should make the most from their pension fund and consider an enhanced annuity if they suffer from lifestyle medical conditions such as high blood pressure, Cholesterol, are a smoker or are overweight. For more serious health conditions such as diabetes, heart conditions or cancer an impaired annuity can be considered offering incomes of 40% higher than the highest standard open market option annuity.

If pensioners are in good health, they can receive up to 30% higher initial incomes than the conventional annuity by if using an investment backed or with profits annuity. If a pensioners can accept the slightly higher risk higher incomes are possible although it is likely they will have other pension annuity income such as a final salary pension or more than one personal pension fund.

News related stories:
Annuity rates may lower if UK inflation fall leads to more QE
Quantitative Easing - annuity rates and pensioner Income 6% lower
Annuity rates under threat as Bank of England injects £50 billion of QE
UK annuity rates lower with new QE as inflation falls
Standard annuity rates fall with Bank of England stimulus package
Retirement income from annuities may be hit with QE measures by BoE
Related internet links:
BBC - UK inflation rate drops to 3% in April
Guardian - UK inflation drops to lowest level in two years
BBC - IMF tells UK to consider QE and interest rate cuts
Annuity Rates
  Age Single Joint  
  55 £5,995 £5,799  
  60 £6,379 £6,136  
  65 £7,385 £6,807  
  70 £8,335 £7,677  
£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:

15-year gilt yields soar to record 5%
Gilt yields soar to record 5% Investors expect higher interest rates for longer with gilt yields soaring to 5%
Pension annuities fall with lower yields
Pension Annuities fall Rising annuity rates up 12% in the last two months ends due to lower inflation
Annuities at risk due to falling inflation
Annuity rates at risk as inflation falls Surprise fall in inflation sends gilt yields -52 basis points lower threat to annuities
Yields higher as interest rates to rise
Annuities up as gilt yields rise Standard annuities rise +3% as central banks expected to raise interest rates
Gilt yields up 44 basis points
Gilt yields up 44 basis points Gilt yields increase 44 basis points as central banks are expected to raise base rates

  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©2001-23 Sharingpensions.co.uk. All Rights Reserved