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9 Jul 2020

Go Direct Personal Finance News  2009

Annuity income falls for fourth consecutive year

Research from Investment Life and Pensions Moneyfacts has shown that 2011 was another poor year for annuity rates, with annuity income falling for a fourth consecutive year.

Over the course of 2011 the average income generated by a standard level without guarantee annuity (based on a £10K purchase price) fell by 8.4% for a 65-year-old male and 7.7% for an equivalent female (see Table 1). This was a sharper reduction than in 2010 when the average standard annuity rate for both a male and female fell by 2.7%.  


Male age 65
Average Annuity

Female age 65 Average Annuity

Male age 65 Highest Annuity

Female age 65 Highest Annuity

January 2011





February 2011

£ 615




March 2011





April 2011





May 2011





June 2011





July 2011





August 2011





September 2011





October 2011





November 2011





December 2011





January 2012





One year change


- 7.7%

- 8.3%



Table 1: Average and top pension annuity income at the age of 65 during 2011
Annuity figures show gross annual annuity payable monthly in advance. Figures are based on a £10K purchase price for a standard level without guarantee annuity.

As a result, average annuity income has now fallen in each of the calendar years from 2008 to 2012. The last time that annuity income actually increased during a calendar year was 2007, when annuity payouts rose by 4.4% (see Table 2).

The market-leading rates available through the course of the year suffered a similar fate to the trend endured by the average rates. Back in January 2011 the top standard level without guarantee annuity rate for a male aged 65 (based on a £10K purchase price) was £647 per annum. Now the market leading rate is just £593 per annum, a reduction of 8.3%. The market-leading rates for an equivalent female, meanwhile, reduced by 8.2% during 2011.

Table 2: Average annual change in pension annuity income by calendar year
Figures are based on a male aged 65 purchasing a standard level without guarantee annuity (£10K purchase price).

Calendar year

Average annual change in annuity income


























 Over the past 16 years a combination of falling gilt yields and improving mortality rates has seen annuity rates drop by a massive 48.3% for males and by 44.8% for females. In monetary terms, £10K would have purchased an average standard level without guarantee annuity of £1,076 per year for a male aged 65 in August 1994 compared with £556 per year today.

Although annuity rates are now at an all-time low, it is also predicted further annuity income reductions are likely as annuity providers move towards the introduction of Solvency II and the implementation of neutral gender pricing following last year's European Court of Justice ruling banning the use of gender as a risk factor in rating insurance contracts.

Richard Eagling, Editor of Investment Life and Pensions Moneyfacts, said: "Unfortunately, by increasing the demand for fixed income instruments such as UK Government Bonds, the ongoing Eurozone crisis and the Bank of England's Quantitative Easing programme have driven gilt and corporate bond yields down over the last twelve months, both of which underpin annuities. In the short term, a successful resolution of the European debt crisis is crucial to stabilising annuity rates."


Moneyfacts Group
Moneyfacts is the UK’s leading independent provider of personal financial information and our data is used and trusted throughout the financial industry.



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