News & Opinion

As expected, annuity rates have fallen slightly following the cut to UK interest rates.

12 months ago (October 2023) the income from the benchmark annuity was £6,531 and today (1^st October 2024) it is £6224. This is a reduction of £300 per annum for a £100,000 annuity or just under 5%. Meanwhile, the yield on 15 year gilts fell from 4.8% to 4.3%, a fall of 50 basis points.

After the Bank of England cut interest rates for the first time since 2020 does this signal the start of cuts to annuity rates?

The short answer is yes but the longer answer is that it depends on what happens in the bond markets.

Annuities have always been a serious business* but since the introduction of pension freedoms in 2015 most retirees (and advisers) have not taken annuities seriously and many invested in pension drawdown rather than purchase an annuity.