Annuity rates risk as gilt yields fall with investors expecting lower interest rates

15-year gilt yields chart - Based on figures for February 2026

Annuity Rates UK - February 2026 review

Annuity rates are at risk of falling -2.8% after 15-year gilt yields reduce 29 basis points to 4.65% as investors expect lower inflation and interest rates.

Gilt yields in the UK have reduced as investors expect interest rates cuts from the Bank of England due to lower inflation with the consumer price index (CPI) falling to 3% in January 2026.

The Governor of the Bank of England Andrew Bailey expects inflation to reduce to the 2% target in Spring this year. This will be helped by lower consumer costs including Ofgem announcing the energy price cap will fall by -7% in April 2026 as well as food prices at the peak and now expected to come down.

In addition US treasury yields are lower as inflation has reduces to 2.4% which was below forecast. This could fall further with less pressure on prices after the implementation of Trump's tariffs, reinforcing lower gilt yields in the UK.

Geopolitical uncertainty and stock market volatility has driven investors to the safe havens of bonds and gilts and this contributes to lower yields. The US and Israeli attack on Iran is driving oil prices higher and the risk of higher inflation could see yields recover in the short term.

As annuity rates are mainly based on 15-year gilt yields, should the Bank of England confirm multiple cuts in base rates this year it is likely gilt yields will reduce further. This means providers may start to reduce annuities from the current highs of the last year.

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Providers of standard annuities decreased rates by an average of -0.17% this month and we would expect rates to fall by -2.73% in the short term if yields remain at current levels.

For smoker and enhanced annuity providers decreased their rates by an average of -0.46% and we would expect rates to fall by -2.44% 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   28%   11%   61% Increases of: max 2.7%   Decreases of: max 3.8 %

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