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1 October 2017 last updated
Gilt yields rise sharply as US and UK signal interest rate rise
15-year gilt yields chart
Based on figures for September 2017
Latest gilt yield chart

Gilt yields rise 26 basis points as Bank of England and US Federal Reserve signal an interest rate rise in the autumn although currently high annuity rate levels are little changed.

Standard rates:  
annuity rates up 0.08%
Enhanced rates:  
annuity rates up 1.75%
Gilt yields:  
annuity rates up 26 basis point

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Annuity rates rise with higher yields

The 15-year gilt yields increased by 26 basis points to 1.67% during the month following the Federal Reserve and Bank of England's strongest indication yet that interest rates will rise in the autumn.

Providers of standard annuities increased rates last month and only a small fall of -0.08% for this month and we would expect rates to decrease by -0.36% in the medium term.

For smoker and enhanced annuity providers increased their rates by an average of 1.75% on average and rates may decrease by -2.88% in the medium 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   70%
annuity rates no change   8%
annuity rates decrease   22%
Increases of:
up to 2.7%

  Decreases of:
up to 2.4%
  Fig 1: Annuity rate changes for the whole market

For the month of September 70% of annuity rates increased by up to 2.5% with 8% remaining unchanged and only 22% 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 -0.08%% during the month. The largest decrease was for escalating rates aged 60 to 65 decreasing by -2.4% for the month.

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 the majority of rates increased by as much as 2.7% for those aged 65 to 75 for single and joint life annuities.

For the latest updates see Annuity Rates Review.

Changes to the 15-year gilt yields

The yields change for the month from 1.41% to 1.67% or 26 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 - September 2017
Day Rate (%) Change (bp*)
1 1.43 +2
4 1.43 0
5 1.38 -5
6 1.37 -1
7 1.34 -3
8 1.35 +1
11 1.40 +5
12 1.49 +9
13 1.50 +1
14 1.57 +7
15 1.62 +5
18 1.63 +1
19 1.66 +3
20 1.66 0
21 1.68 +2
22 1.67 -1
25 1.65 -2
26 1.65 0
27 1.69 +4
28 1.68 -1
29 1.67 -1
  Table 1: Daily 15-year gilt yields and changes
* bp - basis points

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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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