“Gilt yield drama makes rising annuity rates ‘hard to ignore”

Jan 16, 2025 | Pensions, Retirement

An independent (financial adviser’s) view

Annuities used to be the only game in town. When you reached your chosen or pre-selected pension age, you would take your tax-free cash and wave goodbye to the rest of your pension fund in exchange for a guaranteed income for the rest of your days. To provide and secure that guaranteed income, the provider would buy long-term gilts, government bonds, the returns available on these basically determining the amount of income available for every £000 of pension fund. After the GFC (Global Financial Crash, I know), interest rates went down to virtually nothing, and so did returns on those long-term gilts and annuity rates. Last week, the markets decided that Rachel & Co were in rather more of a mess than they were letting on and that the cost of government borrowing should go up.  Which increased returns on those gilts, with better annuity rates to follow shortly thereafter. And so annuities, such poor value for so long are, if not the only game in town, certainly serious players again. 

Read more here