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4 February 2025 last updated

Annuity rates rise 2pc as gilt yields fall expecting lower interest rates

Annuity rates rise 2%
 
Standard rates:  
annuity rates change 2.04%
Enhanced rates:  
annuity rates change 0.56%
Gilt yields:  
annuity rates change 3 basis point
 
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15-year gilt yields chart - Based on figures for January 2025
Latest gilt yield chart

Annuity Rates UK - January 2025 review

Standard annuity rates rise over +2% after 15-year gilt yields soar to a record 5.29% with fears of higher inflation with further US tariffs and fewer interest rate cuts for this year.

Yields reduced to more sustainable levels ending the month at 4.91% on the prospect of central bank interest rates cuts following US core inflation falling slightly to 3.2% and UK inflation lower ar 2.5%.

The Bank of England is forecast to reduce interest rates on 7 February 2025 by 0.25% to 4.50% and annuity rates may reduce slightly as a result.

In the US Donald Trump applied 25% tariffs on Canadian and Mexican imports and 10% on Chinese imports. Tariffs may be announced on European imports and retaliatory action will further increase the cost of goods to consumers adding to inflation.

Find related news here:
Gilt yields peak at 5.29pc on inflation fears and fewer interest rate cuts
Annuities rise as gilt yields hit 5pc with interest rates higher for longer

Providers of standard annuities increased rates by an average of +2.04% this month and we would expect rates to fall by -2.34% in the short term if yields remain at current levels.

For smoker and enhanced annuity providers increased all their rates by an average of +0.56% and we would expect rates to fall by -0.86% in the short term if yields do not fall.

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
annuity rates decrease   71%
annuity rates no change   4%
annuity rates decrease   25%
Increases of:
max 5.0%

 

Decreases of:
max -2.2%

  Fig 1: Annuity rate changes for the whole market


For the month 71% of annuity rates increased by up to +5.0% with 4% remaining unchanged and 25% decreasing by as much as to -2.2%.

What happened to standard rates

Below shows a fund of £100,000 with the change in standard annuity rates for single and joint pensioners from age 55 to 75 with different annuity options such as level or escalating over 1 month compared to gilt yields:

Standard annuity 1 month changes
Fig 2: Change in standard rates last month compared to gilt yields


What happened to enhanced rates

Lifestyle smoker and enhanced annuities have decreased significantly across the board for all types of annuities and ages.

Enhanced annuity 1 month changes
Fig 3: Change in enhanced rates last month compared to gilt yields


For the latest updates see Annuity Rates Review.

Changes to the 15-year gilt yields

The yields change for the month from 4.94% to 4.91% or -3 basis points. Table 1 below shows the daily 15-year gilt yields and the increase or decrease from the previous day's close:


15-Year Gilt Yields - January 2025
Day Rate (%) Change (bp*)
2 4.95 +1
3 4.95 0
6 4.96 +1
7 5.04 +8
8 5.18 +14
9 5.19 +1
10 5.22 +3
13 5.26 +4
14 5.28 +2
15 5.09 -19
16 5.05 -4
17 5.02 -3
20 5.02 0
21 4.95 -5
22 4.99 +4
23 4.99 0
24 4.99 0
25 4.94 -5
27 4.96 +2
28 4.96 0
29 4.96 0
30 4.96 0
31 4.91 -5
  Table 1: Daily 15-year gilt yields and changes
* bp - basis points
News related stories:
Annuities at record high even as gilt yields drift slightly lower to 4.55pc
Annuity rates rise 10pc this year to record sixteen year high after Budget
Annuity Rates
  Age Single Joint  
  55 £6,343 £6,063  
  60 £6,771 £6,449  
  65 £7,540 £7,033  
  70 £8,488 £7,724  
£100,000 purchase, level rates, standard
Unisex rates and joint life basis
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