Surging interest rates in the UK has seen annuity rates – and sales – soar from where they were just a couple of years ago. The increases have put annuities back in the headlines again and this time it’s great news for savers.
Rate analysis from Legal & General shows that rates have been enjoying an upwards trend again since May, after dropping from their peak in October last year. The provider’s latest rate for August 2023 is 6.53%, a significant increase on last August’s 5.69%.
Annuity rates are an important factor in determining the level of income a person in the UK will receive when they buy an annuity with their pension savings. As rates have increased from what they were this time last year, so has the amount of income being offered.
Why are annuity rates increasing?
Annuity rates have been fuelled by increases in gilt yields, which are linked to the Bank of England’s base rate.
In an effort to bring inflation down, the Bank of England has pushed the base rate to 5.25%. That’s the 14th consecutive rise for the country and the highest level in 15 years.
Inflation is currently at 6.8%, but the Bank’s target is 2%. It means rates are forecast to rise further still. The base rate is expected to rise again this year, with some forecasting it to peak at 6% in early 2024.
Higher annuity rates sees boom in sales
With annuity rates being linked to the base rate, annuity customers are rushing to lock in a higher rate which can be fixed for life with an annuity.
Figures from The Association of British Insurers show a 22% surge in sales in the first quarter of the year, with 16,256 annuities sold.
People are spending more on their annuities too. ABI figures from Q1 2023 reveal that annuity premiums hit £1.2 billion in the first quarter of this year, the highest value of premiums seen since 2015.
More information on annuity rates
Leading UK broker Retirement Line uses the latest annuity rates from leading providers to show what income a person could expect to receive from a £100,000 pension fund. There rates table shows examples of single and joint life annuities, as well as for escalating and level income options.
Disclaimer:
This announcement is not directed at any investors or potential investors, and does not constitute an offer to sell — or a solicitation of an offer to buy — any securities, and may not be used or relied upon in evaluating the merits of any investment. Any projections, estimates, forecasts, targets, prospects and/or opinions expressed in this release are subject to change without notice. The contents here should not be construed as or relied upon in any manner as investment, legal, tax, or other advice.
Source: Story.KISSPR.com
Release ID: 716134