Annuity Rates, Annuities, Pensions, Divorce
Equity release lifetime mortgages
Home News Annuity Rates Annuities Pension Annuity Impaired Annuity Annuity Quotes Pensions Divorce Resources
   


8 November 2012 last updated
UK annuities to stabilise with Bank of England stance on QE

The Bank of England has decided not to extend Quantitative Easing (QE) and pensioners buying their UK annuities this year will not be subject this extra pressure on annuity rates.

Interest rates have been kept at 0.5% by the Bank of England they have decided to leave Quantitative Easing (QE) at the current level of £375 billion. This means the BoE have exhausted their previous £50 billion of QE and will refrain from purchasing gilts.

QE is a method that allows the BoE to inject money into the UK economy by purchasing gilts. As annuities are based on the 15-year gilt yields any action to buy these will increase the price and decrease the yield. As yields decrease so will annuity rates.

The programme of QE started in March 2009 as interest rates reached their record low level of 0.5% and annuities have been volatile every time the bank of England has purchased gilts.

 
Bank of England stance stabilise to annuities
 
  More annuity topics
  November News 2012
  News & articles
  Archive news stories
  Flexi-access drawdown
  Annuity rates tables
  Outlook for 2019
  Annuity rates charts
  15-year gilt yields
  Latest annuity rates
 

Pressure on annuities less but risks persist

Economists believe that the Bank of England may have abandoned the Quantitative Easing programme and will focus on the Funding for Lending Scheme (FLS) designed to provide low cost credit to business and households. This change means gilts will not be used to help the economy and annuities will avoid the pressure.

Since QE started in 2009 the 15-year gilt yields have reduced from 4.17% to 2.23% or 194 basis points. As a rough guide with would translate into a 19.4% fall in annuity rates and our benchmark example foe a male aged 65 with a fund of £100,000 has seen a greater reduction of 23.4%. Since then the income from an annuity has reduced from £7,309 pa to £5,605 pa or £1,704 pa. For a pensioner aged 65 the Office of National Statistics (ONS) expect him to live for a further 17.6 and the income he can expect from a pension annuity has reduced by £29,990 over his lifetime.

Other factors driving down gilt yields is the demand from Eurozone investors. Due to the debt crisis in Europe investors fear the risks of default on sovereign bonds and in times of uncertainty will more their funds to safe havens such as UK government bonds and gilts pushing up the price and reducing the yields. This is a risk to pensioners as lower yields will reduce annuity rates and income levels for their lifetime.

The European Central Bank (ECB) has announced that it will keep interest rates at their current level of 0.75% as the economy remains weak with no expectation of improvement as risks persist from Greece and Spain. The US fiscal cliff may also help to keep yields low so pensioners should not expect to see annuities improve in the short to medium term.

News related stories:
Annuity rates likely to lower as Bank of England gives QE hint
Annuity rates could remain at current levels with no more QE
UK annuity rates may lower as QE expected after falling inflation
Retirement annuities under threat from more BoE Quantitative Easing
Related internet links:
BBC - Bank of England no further QE
How Quantitative Easing can reduce annuity rates
Call 020 8816 7501 for a quote
Annuity Rates
  Age Single Joint  
  55 £4,433 £4,127  
  60 £4,914 £4,660  
  65 £5,563 £5,094  
  70 £6,272 £5,976  
£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:

Gilt yields lower as equities fall
Annuity Rates December 2018 Gilt yields are lower with geopolitical tension between the US and China
Annuity rates resist fall in gilt yields
Annuity rates resist fall Annuity rates are steady following gilt yields fall on fears of US slowdown
Retirement income down 14%
Retirement income down Brexit turmoil and equity volatility sends investors to the safety of gilts and bonds
Drawdown numbers hit record high
Pension drawdown withdrawals hit record high

Data from HMRC shows a record 5.9bn accessed in 2018 using drawdown


  Follow Us:
You can follow the latest annuity updates on Twitter or as a fan on Facebook and Google+
  Facebook Page Twitter 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©2001-19 Sharingpensions.co.uk. All Rights Reserved