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9 December 2022 last updated

Annuity rates still at thirteen year high even with lower gilt yields

Annuity rates still at thirteen year high
 
Standard rates:  
annuity rates change 6.10%
Enhanced rates:  
annuity rates change 3.75%
Gilt yields:  
annuity rates change 35 basis point
 
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15-year gilt yields chart - Based on figures for November 2022
Latest gilt yield chart

Annuity Rates UK - November 2022 review

Providers keep annuities at a thirteen year high with our benchmark annuity rate up 40% in 2022 compared to the 15-year gilt yields rising 24%. During November gilt yields have reduced -35 basis points to 3.52% as the effect of the mini budget diminishes.

Find related news here:
Retirement income up 104pc in two years as annuities hit record high
Gilt yields reach fourteen year high of 5.09pc with record annuity rates

The difference between annuities and gilt yields suggest providers have priced in further rise in yields in the short term expecting central banks to continue raising base rates.

Therefore annuity rates may remain at the current level, fall or rise slightly until further progress is made by the 15-year gilt yields.

Providers of standard annuities decrease annuity rates by an average of -6.10% for this month and we would expect rates to rise by 2.50% in the short term if yields remain at current levels.

For smoker and enhanced annuity providers have decreased their rates by an average of -3.75% and we would expect rates to rise by 0.15% 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
annuity rates decrease   7%
annuity rates no change   0%
annuity rates decrease   93%
Increases of:
max 1.6%

 

Decreases of:
max -10.3%

  Fig 1: Annuity rate changes for the whole market


For the month 7% of annuity rates increased by up to 1.6% with 0% remaining unchanged and 93% decreasing by as much as to -10.3%.

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 3.87% to 3.52% or -35 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 2022
Day Rate (%) Change (bp*)
1 3.83 -4
2 3.78 -5
3 3.92 +14
4 3.96 +4
7 4.01 +5
8 3.90 -11
9 3.75 -15
10 3.62 -13
11 3.69 +7
14 3.69 0
15 3.66 -3
16 3.48 -18
17 3.53 +5
18 3.59 +6
21 3.52 -7
22 3.46 -6
23 3.34 -12
24 3.39 +5
25 3.48 +9
28 3.51 +3
29 3.48 -3
30 3.52 +4
  Table 1: Daily 15-year gilt yields and changes
* bp - basis points
News related stories:
Pension annuities up 47pc this year with extra help from Mini Budget
Annuity rates increase 15pc as Mini Budget sends yields to record levels
Annuity Rates
  Age Single Joint  
  55 £6,132 £5,784  
  60 £6,532 £6,234  
  65 £7,247 £6,808  
  70 £8,170 £7,616  
£100,000 purchase, level rates, standard
Unisex rates and joint life basis
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