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


26 October 2018 last updated

Annuity income hit by volatility in global equity and gilts market

Recent falls in global equity markets and gilt yields has made buying annuities more difficult as pension fund values are lower reducing the lifetime income from an annuity.

Equity markets around the world have reduced with about $5 trillion in value wiped from the global stock and bond markets in October.

The FTSE-100 index has reduced 938 points or 11.9% from a high of 7,877 in May to the current level of 6,939.

The 15-year gilt yields reached a high for the year after rising rapidly to 1.85% in October and reduced by 29 basis points in the last two weeks to 1.56% as investors seek the safety of bonds and gilts.

Annuity rates are predominately based on gilt yields which have returned to the mid 1.5% levels seen during the summer.

Since this time providers have not followed the rise in yields since September but instead reduced annuity rates gradually by about 2% so limiting the impact of recent gilt yield falls.

 
Annuity income hit by volatility
  Equity markets fall sending pension funds 8% lower for the year with no change in annuity rates
  More annuity topics
  Quarter 4 News 2018
  News & articles
  Archive news stories
  Flexi-access drawdown
  Annuity rates tables
  Outlook for 2022
  Annuity rates charts
  15-year gilt yields
  Latest annuity rates
 

Equity falls force delay to buy annuities

Many people remain invested until they buy their annuity and recent falls in equity markets may mean delaying this decision until a recovery in pension fund values.

Equity markets are falling due to a complex mix of rising US interest rates, slowing growth in China and Italy's debt risk to Europe with investors de-risking to safe havens such as bonds and gilts.

Gilt yields and annuity rates
Fig 1: Chart comparing the FTSE-100 index, annuity rates and gilt yields


The above chart compares the change in the FTSE-100 index, standard annuity rates and 15-year gilt yields since January 2018.

Both annuity rates and gilt yields have been plus/minus 2% since the start of the year, however, equities have been volatile and are now -8.04% lower for 2018.

For our benchmark example of a person 65 year old with a £100,000 fund at the beginning of the year, they could purchase an annuity on a single life, level basis with income of £5,546 pa. By delaying buying an annuity their pension fund tracking the FTSE-100 index would be worth £91,960 and annuity today would be £5,076 pa or a difference of £470 pa.

In terms of total income during their life, the Office of National Statistics (ONS) would expect a male to live for 18.5 years and he will have -£8,695 less over his lifetime. For a female she can expected to live for 20.9 years decreasing her lifetime income by -£9,823.

Although equity markets may make a small bounce back over the next few days, further uncertainty is expected in the markets over the following weeks until a support level is reached.

There are fears that the slowdown in the Chinese economy may be the catalyst that results is a downturn to the global economy and the US tariffs against China could enhance this outcome.

Pension funds may not return to the highs of summer 2018 until next year so for people buying their annuity and cannot wait may have no choice but to buy at current values.

News related stories:
Annuities could rise 1.6% as gilt yields recover on central bank plans
Pension annuity rates up over 1% with competition from providers
Annuity rates reduce as interest rate rise unlikely due to weak UK growth
UK annuities risk fall after Trump trade tariffs on Chinese imports
Related internet links:
Market Watch - Global sell off has erased $5 billion from equities
 
Annuity Rates
  Age Single Joint  
  55 £6,361 £5,898  
  60 £6,842 £6,244  
  65 £7,474 £6,843  
  70 £8,405 £7,660  
£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:

Annuities rise 6% to eleven year high
Annuities rise 6% to 11 year high Annuities rise 6% and gilt yields increase 90 basis points due to central bank action
Gitl yields rise 87 basis points
rise 87 basis points Gilt yields higher as investors shrug off global recession fears as base rates rise
Retirement income at record high
Retirement income soars Retirement income rises by 71.6% as yields and annuities are driven higher
Pension annuities fall on recession fears
Pension annuities fall Pension annuities fall and gilt yields are lower by -27 basis points to 2.32%
Annuity rates rise but yields weaken
Annuity rates rise 7pc last month Annuity rates rise by a record 7% for a single month but gilt yields weaken

  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©2001-22 Sharingpensions.co.uk. All Rights Reserved