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3 December 2021 last updated

Annuity rates decrease due to investor fears over Omicron variant

Annuity rates decrease due to Omicron variant
 
Standard rates:  
annuity rates change 1.61%
Enhanced rates:  
annuity rates change 0.37%
Gilt yields:  
annuity rates change 18 basis point
 
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15-year gilt yields chart - Based on figures for November 2021
Latest gilt yield chart

Annuity Rates UK - November 2021 review

Annuity rates decrease up to -4.8% from providers as gilt yields reduce 25 basis points after investors seek safe havens due to the fears over the Omicron variant.

The new Covid variant Omicron found in South Africa and spreading fast to over 30 countries is creating concern with investors and the 15-year gilt yields has reduced from a high of 1.22% on 3 November to 0.97% by the end of the month.

Yields were expected to rise in December through to 2022 as the Bank of England intends to raise base rates. This may be delayed with more travel restrictions due to rising numbers of Covid cases and the possible impact on the economic recovery.

Find related news here:
Pension annuities could fall over 1pc with new Covid variant Omicron
Bank of England could raise base rates sending gilt yields higher

Providers of standard annuities decreased annuity rates by an average of -1.61% for this month and we would expect rates to fall by -0.19% in the medium term if yields remain at current levels.

For smoker and enhanced annuity providers have decreased their rates by an average of -0.37% and we would expect rates to fall by -1.43% in the medium 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
annuity rates decrease   15%
annuity rates no change   17%
annuity rates decrease   68%
Increases of:
max 3.0%

 

Decreases of:
max -4.8%

  Fig 1: Annuity rate changes for the whole market


For the month 15% of annuity rates increased by up to 3.0% with 17% remaining unchanged and 68% decreasing by as much as to -4.8%.

What happened to standard rates

Below shows a fund of £100,000 with the change in standard annuity rates for single and joint pensioners from age 55 to 75 with different annuity options such as level or escalating over 1 month compared to gilt yields:

Standard annuity 1 month changes
Fig 2: Change in standard rates last month compared to gilt yields


What happened to enhanced rates

Lifestyle smoker and enhanced annuities have decreased significantly across the board for all types of annuities and ages.

Enhanced annuity 1 month changes
Fig 3: Change in enhanced rates last month compared to gilt yields


For the latest updates see Annuity Rates Review.

Changes to the 15-year gilt yields

The yields change for the month from 1.15% to 0.97% or 18 basis points. Table 1 below shows the daily 15-year gilt yields and the increase or decrease from the previous day's close:


15-Year Gilt Yields - November 2021
Day Rate (%) Change (bp*)
1 1.18 +3
2 1.19 +1
3 1.22 +3
4 1.13 -9
5 1.01 -11
8 1.01 0
9 0.97 -4
10 1.08 +11
11 1.09 0
12 1.09 +2
15 1.14 +4
16 1.16 +2
17 1.15 -1
18 1.13 -2
19 1.08 -5
22 1.12 +4
23 1.16 +4
24 1.15 -1
25 1.13 -2
26 1.00 -13
29 1.04 +4
30 0.97 -7
  Table 1: Daily 15-year gilt yields and changes
* bp - basis points

News related stories:
Gilt yields increase as Federal Reserve signals tapering to start in 2021
Gilt yields fall as investors seek safe havens with spread of Delta variant
Annuity rates are highest for two years despite lower 15-year gilt yields
Annuity Rates
  Age Single Joint  
  55 £5,025 £4,644  
  60 £5,501 £5,102  
  65 £6,168 £5,832  
  70 £7,003 £6,583  
£100,000 purchase, level rates, standard
Unisex rates and joint life basis
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