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7 August 2017 last updated
Gilt yields lower as US Fed delay raising interest rates due to weak inflation
15-year gilt yields chart
Based on figures for July 2017
Latest gilt yield chart

Gilt yields fall as investors react to US Federal Reserve delay raising interest rates due to weak inflation and doubts over Trump growth policy.

Standard rates:  
annuity rates up 0.78%
Enhanced rates:  
annuity rates up 0.02%
Gilt yields:  
annuity rates up 3 basis point

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Annuity rates rise with higher yields

The 15-year gilt yields decreased by 3 basis points to 1.59% during the month with a sharp drop after the US Federal Reserve delays increasing interest rates due to weaker than expected inflation. In addition investors have doubts over President Donald Trump’s pro-growth policy agenda with funds moving to bonds and gilts sending yields lower.

Yields are 3 basis points lower with standard providers decreasing rates by an average of -0.78% and we would expect rates may increase by 0.48% in the short term.

For smoker and enhanced annuity providers increased their rates by an average of 0.02% on average and rates may decrease by -0.32% in the short term.

Fig 1 below shows the annuity rates changes for the whole market and the proportion that have either increased, decreased or or did not change. It also shows the range of the changes of the annuity rates over the last month:

Annuity Rates Changes
Increase No change Decrease
annuity rates decrease   21%
annuity rates no change   10%
annuity rates decrease   69%
Increases of:
up to 2.2%

  Decreases of:
up to 2.3%
  Fig 1: Annuity rate changes for the whole market

For the month of July 91% of annuity rates increased by up to 3.6% with 2% remaining unchanged and only 7% decreasing.

What happened to standard rates

Below shows a fund of £100,000 with the change in standard annuity rates for single and joint pensioners from age 55 to 75 with different annuity options such as level or escalating over 1 month compared to gilt yields:

Standard annuity 1 month changes
Fig 2: Change in standard rates last month compared to gilt yields

Standard annuities decreased by an average of -0.78% during the month. Virtually all age groups experienced decreases and in particular those aged 60 for all annuity basis with falls of up to -1.88%.

What happened to enhanced rates

Lifestyle smoker and enhanced annuities have decreased significantly across the board for all types of annuities and ages.

Enhanced annuity 1 month changes
Fig 3: Change in enhanced rates last month compared to gilt yields

For enhanced and smoker providers increased rates across the board with an average rise of only 0.02%. Joint life basis increased up to 2.2% for those aged 55 with the largest decrease of -2.3% for 100% joint life.

For the latest updates see Annuity Rates Review.

Changes to the 15-year gilt yields

The yields change for the month from 1.62% to 1.59% or 3 basis points. Fig 2 below shows the daily 15-year gilt yields and the increase or decrease from the previous day's close:

15-Year Gilt Yields - July 2017
Day Rate (%) Change (bp*)
3 1.61 -1
4 1.60 -1
5 1.63 +3
6 1.68 +5
7 1.68 0
10 1.64 -4
11 1.64 0
12 1.63 -1
13 1.66 +3
14 1.67 +1
17 1.65 -2
18 1.58 -7
19 1.57 -1
20 1.58 +1
21 1.55 -3
24 1.56 +1
25 1.61 +5
26 1.60 -1
27 1.57 -3
28 1.58 +1
31 1.59 +1
  Table 1: Daily 15-year gilt yields and changes
* bp - basis points

News related stories:
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Annuities up 7% as yields recover after election of Donald Trump
Enhanced annuity rates up 2.4% as gilt yields recover from Brexit
Annuity Rates
  Age Single Joint  
  55 £3,851 £3,569  
  60 £4,268 £3,973  
  65 £4,965 £4,581  
  70 £5,831 £5,274  
£100,000 purchase, level rates, standard
Unisex rates and joint life basis
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