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

8 July 2014 last updated
Pension annuity income threat as FTSE and yields fall on manufacturing data

After a positive start to the month pension annuity income is under threat after a fall in the 15-year gilt yields following the first manufacturing output decline this year and concerns over the nature of a recovery.

Annuity rates are primarily based on the 15-year gilt yields. In the past two days yields are 8 basis points lower and as a general rule an 8 basis point fall results in a 0.8% reduction in annuity rates.

Most people remain invested before taking their benefits and possibly by a pension annuity or fixed term plan and equities have also reduced.

For those that have a fund that tracks the FTSE-100 index their fund is now lower by 1.8% to 6,738 and the combination of lower fund value and lower annuity rates reduces income in retirement.

UK factory output has reduced for the first time this year by 1.3% according to the Office for National Statistics (ONS) after economists expected growth of 0.4% in May.

Pension annuity income threat from lower yields
  UK manufacturing output declines sending markets and yields lower and threatening annuity income
  More annuity topics
  Quarter 3 News 2014
  News & articles
  Archive news stories
  Flexi-access drawdown
  Annuity rates tables
  Outlook for 2019
  Annuity rates charts
  15-year gilt yields
  Latest annuity rates

Lower confidence can hit pension income

Although the UK economy has recovered strongly this year any unusual data may hit investor confidence sending equity markets lower. As funds seek safe havens such as UK government bonds the price increases and yields decrease.

Although this may be a short term reaction to an unexpected event, it can still have an immediate impact on someone retiring now with a lower fund value and income from a pension annuity.

Our benchmark example for a person aged 65 with a fund of £100,000 could have purchased a single life, level annuity with an income of £6,143 pa. Since markets have reduced the fund would be lower at £98,200 and the income is only £6,032 pa today, a reduction of £111 pa or 1.8%.

In terms of lifetime income, the Office of National Statistics (ONS) would expect a male to live for 17.3 years and he will have £1,920 less over his lifetime. For a female she can expected to live for 20.4 years decreasing her income by £2,264.

This does not take into account a 0.8% reduction in annuity rates should the providers pass the fall in gilt yields directly to people retiring with lower annuity rates.

Fall in manufacturing unexpected

Manufacturing only represents 10% of the UK economy so the decline in output is unlikely to have a significant impact as there has been growth for the first six months of the year.

However, economists were expecting a gain of 0.4% rather than a fall of 1.3%. This compares to the same time last year where manufacturing output increased by 3.7% in May following April with an increase of 4.3%.

Although the Bank of England expected UK growth to slow down in the second half of this year the governor Mark Carney has not previously indicated any evidence of this occurring.

Any further sign of a slow down such as in the service sector could mean the Bank of England would be unlikely to increase interest rates in the short term as suggested by some economists. This would mean people retiring may have to wait until the middle of 2015 before annuity rates improve further.

News related stories:
UK annuity income less after FTSE index lower on tech bubble fears
Annuity income is 2.4% lower as FTSE index falls on currency concerns
Related internet links:
Telegraph - UK manufacturing output declines in May
Guardian - Surprise drop in UK manufacturing
BBC - UK manufacturing output in surprise fall
Annuity Rates
  Age Single Joint  
  55 £3,723 £3,370  
  60 £4,192 £3,911  
  65 £4,920 £4,378  
  70 £5,769 £5,246  
£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:

Equities rally on hopes of Covid-19 vaccine
Equity markets rally

Equity markets rallied with news of positive drugs trial for a Covid-19 vaccine

Annuities could rise as markets rebounds
Equity markets and gilt yields rebound

Strong rise in US equities as economic data sends markets and yields higher

Annuity rates higher as yields stabilise
Annuity rates rise despite lower yields Annuity rates higher as providers more confident gilt yields return to stability
Annuities rise after Covid-19 trials
Annuities and equities rise Global equities and annuities increase after reports of successful Covid-19 trials
Annuity rates could rise with volitile yields
Annuity rates could rise Coronavirus has threatened growth with volitile yields and annuities could rise

  Follow Us:
You can follow the latest annuity updates on Twitter or as a fan on Facebook
  Facebook Page Twitter Page   This website is for marketing purposes only and does not provide specific financial or legal advice. Website security issued by GeoTrust and Equifax. Copyright©2001-20 All Rights Reserved