Triggers for Higher Annuity Rates

GSP

Hi,
These rates have been very low for some time now.
They could stay low forever more but wondered if there were events, market falls rises, or something to look out for that might trigger a resurgence in these.

dunstonh

Interest rates is the key thing as annuities are linked to gilt yields.

However, cross-subsidy is also important and that is in decline. Mortality gain is less effective as less people are buying annuities and most bought now are enhanced annuities that price in the health reducing the cross subsidy.

When interest rates go up to the levels of the past, then they will be more attractive. However, that could take a generation or two.

GSP

Thanks dunstonh.
Yes rates have hardly moved since the financial crisis.

westv

Might depend what happens to inflation in post Brexit UK.

Thrugelmir

GSP wrote: »

These rates have been very low for some time now.

Better than equivalent bond fund yields.

Thrugelmir

GSP wrote: »

Yes rates have hardly moved since the financial crisis.

QE was used by the BOE to buy Gilts and Blue chip corporate bonds. Side effect was to push investors towards riskier equity investments. Pulling levers has all sorts of consequences.