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9 January 2017 last updated
Gilt yields fall as investors seek safe havens with market uncertainty
15-year gilt yields chart
Based on figures for December 2016
Latest gilt yield chart
 

The 15-year gilt yields have reduced towards the end of the month after uncertainty following terror attacks and poor US home sales data.

Standard rates:  
annuity rates up 1.02%
Enhanced rates:  
annuity rates up 0.30%
Gilt yields:  
annuity rates up 17 basis point



 
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Gilt yields end lower for the month

The 15-year gilt yields decreased to 1.62% lower by 17 basis points for the month. With uncertainty in December investors moved to the safety of treasury notes, gilts and bonds following the terror attacks including the death of the Russian envoy is killed and data for US home sales showed a 2.5% fall in November.

Standard providers increase rates by an average of 1.02% and we would expect in the short term rates may decrease by 2.72%.

For smoker and enhanced annuity providers increased their rates by an average of 0.30% on average and in the short term rates may decrease by 2.00%.

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   54%
annuity rates no change   10%
annuity rates decrease   36%
Increases of:
up to 5.9%

  Decreases of:
up to 2.1%
  Fig 1: Annuity rate changes for the whole market


For the month of December 54% of annuity rates increased by up to 5.9% with 10% remaining unchanged and 36% 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 increased by an average of 1.02% during the month. For those aged 65 to 75 rates were higher by up to 5.9% on a single 3% escalating basis and 7.6%.

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 rates increased by an average of 0.30% with a larger rise of 3.0% for those aged 65 buying single life, level annuity. The highest decrease was for those aged 55 with single life 10 year guarantees reducing by 2.1%.


For the latest updates see Annuity Rates Review.

Changes to the 15-year gilt yields

The yields change for the month was from 1.79% to 1.62% or 17 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 - December 2016
Day Rate (%) Change (bp*)
1 1.88 +9
2 1.75 -13
5 1.77 +2
6 1.80 +3
7 1.75 -5
8 1.77 +2
9 1.85 +8
12 1.87 +2
13 1.85 -2
14 1.79 -6
15 1.89 +10
16 1.83 -6
19 1.80 -3
20 1.80 0
21 1.77 -3
22 1.75 -2
23 1.72 -3
26 1.72 0
27 1.72 0
28 1.67 -5
29 1.61 -6
30 1.62 +1
  Table 1: Daily 15-year gilt yields and changes
* bp - basis points


News related stories:
Annuities up 7% as yields recover after election of Donald Trump
Enhanced annuity rates up 2.4% as gilt yields recover from Brexit
UK annuities could rise 5% as US bond selloff sends yields higher
Retirement annuity rates could fall as Bank starts more QE
Annuity Rates
  Age Single Joint  
  55 £4,216 £3,974  
  60 £4,702 £4,423  
  65 £5,453 £5,013  
  70 £6,105 £5,482  
£100,000 purchase, level rates, standard
Unisex rates and joint life basis
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