Gilt yields remain high as investors expect fewer interest rate cuts

15-year gilt yields chart - Based on figures for September 2025

Annuity Rates UK - September 2025 review

Annuity rates remain at a seventeen year high with our benchmark for a 65 year old using £100,000 to purchase a single life and level income is currently at £7,819 pa. 

This income is up +5.0% or £373 pa since the start of the year due to higher 15-year gilt yields. which have been as high as 5.28% in September before ending the month slightly lower at 5.13%.

Gilt yields are higher as investors expect fewer interest rate cuts from central banks. Although the US Federal Reserve reduced interest rates by 0.25% in September, the Bank of England have not reduced rates and may have only one more reduction this year.

Investors are also concerned about the UK government's £30-50 billion shortfall in funding. This means the Chancellor must either raise taxes, cut spending or increase borrowing and things will remain uncertain until the Autumn Budget.

Bond yields are higher due to higher global inflation and in particular higher services inflation in the UK. In addition, the UK pension industry are buying fewer long dated gilts due to changes in defined benefit schemes driving yields higher.

In the US, yields are higher on bonds as investors expect higher US borrowing due to lost tariff revenues going forward which has an impact on the global bond markets in general.

Find related news here:
Annuities rise as yields exceed 5pc due to UK public finance concerns
Gilt yields fall as interest rate cut expected due to weak economic data

Providers of standard annuities increased rates by an average of +0.32% this month and we would expect rates to fall by -0.82% in the short term if yields remain at current levels.

For smoker and enhanced annuity providers increased their rates by an average of +0.41% and we would expect rates to fall by -0.91% in the short term if yields remain at current levels.

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   78%   22%   0% Increases of: max 0.6%   Decreases of: max 0.0%

Fig 1: Annuity rate changes for the whole market

Fig 2: Change in standard rates last month compared to gilt yields

Fig 3: Change in enhanced rates last month compared to gilt yields