Following the news that the Bank of England (BoE) has kept Bank Rate at 4%, voting 7-2, representatives from Hargreaves Lansdown have weighed in on what this could mean for savings and annuities.
Steve Clayton, head of equity funds, Hargreaves Lansdown:
“Today’s decision by the Bank of England to hold interest rates steady at 4.0% comes as no surprise. Markets were pricing in a 98% likelihood that rates would stay at 4.0%, because so far, we are not seeing enough progress in bringing inflation down to give room for manoeuvre on rates. Service prices remain far above the overall 2% target and goods price inflation edged up toward 3% last month. The Bank will be watching employment and growth data closely for now, because it will worry about choking off growth if interest rates stay too high for too long, but for now, its hands look tied.”
What it means for savings
Mark Hicks, head of Active Savings, Hargreaves Lansdown:
“The savings market has been very steady over the last six months as the market continues to move towards a more neutral state with inflation remaining sticky, which keeps pressure on the Bank of England from any significant further falls in base rate. We’ve come through a long period where high interest rates in the short term were expected to be followed by cuts, so the best deals were available on easy access savings.
The divide in the Bank of England Monetary Policy Committee vote last time round has convinced the markets that we’re not going to get another rate cut for a while, and that when they eventually come, they may be smaller and more spaced out. This means fixed rate deals have held up better and even risen slightly whilst easy access rates have continued to fall so that we have a very flat savings curve with similar rates across easy access and fixed.
While savers may still be tempted to hang on in easy access, because of the flexibility it offers, they are still expected to be on their way down, and when easy access rates fall, those fixed deals will look more attractive. It means that anyone who has cash they don’t need for a while might want to consider fixing while they can still get around 4.5%.”
What it means for annuities
Helen Morrissey, head of retirement analysis, Hargreaves Lansdown:
“The Bank of England opted to keep interest rates on hold this month, which is good news for those on the hunt for an annuity. We’ve seen some massive shifts in the market in recent years as rising interest rates helped raise the incomes from the doldrums towards all-time highs. It has settled down more recently but continues to offer good value for those in need of a guaranteed income. It’s led to a huge surge in popularity with recent FCA data showing the market continued to grow – up by 7.8% in 2024/25.
These settled conditions will keep interest in the market high with the most recent data from HL’s annuity comparison service showing that a 65-year-old with a £100,000 pension can get up to £7,793 per year from a single life level annuity with a five-year guarantee. It is however vital to do your research before opting for an annuity. Once bought an annuity cannot be unwound so if you make a mistake, you will be stuck with the consequences. Make sure you get quotes from across the market before you take the plunge – an annuity comparison service will help you to do this. Different providers offer different rates so it’s important you see what is out there.
As well as income levels you also need to make sure you chose the right type of annuity for your needs. If you have health conditions, then an enhanced annuity could get you more income while if you are married then you might want to consider getting a joint life product to make sure your spouse or civil partner is taken care of if you die before them. Similarly, you may want to consider whether an inflation linked product that rises every year is a good option for you over a level annuity that offers a higher starting income but does not rise beyond that.”
