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Best annuity rates

Annuity rates have recovered 5.5% this year after reaching an all time low in January.

Since the beginning of the financial crisis in July 2008 annuity rates are 28.3% lower today and people buying their annuities are locking into historically low levels of income.

The reason why annuity rates are lower is due to a number of factors related to the economic crisis and in particular gilt yields. Annuities are primarily based on the 15-year gilt yields and these have reduced significantly by 226 basis points from 4.83% to 2.57%. During the financial crisis institutional investors have moved funds to safe havens such as UK government bonds and gilts increasing the price and reducing the yield. As the yield decreased annuity rates followed. Interest rates were also reduced to record lows of 0.5% and the Bank of England’s stimulus programme called Quantitative Easing has so far printed £375 billion used to by gilts, guaranteeing low yields and lower annuity...

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