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6 February 2018 last updated
Gilt yields up as US rates expected to rise after strong growth figures
15-year gilt yields chart
Based on figures for January 2018
Latest gilt yield chart
 

The 15-year gilt yields are up 25 basis points for the start of the year as US interest rates are expected to rise in March after strong economic growth figures and rallying markets.

Standard rates:  
annuity rates change 1.54%
Enhanced rates:  
annuity rates change 0.68%
Gilt yields:  
annuity rates change 25 basis point



 
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Rising gilt yields send annuity rates higher

The 15-year gilt yield are up 25 basis point to 1.75% during January 2018 with providers of standard annuities increasing rates by 1.54% for this month and we would expect rates to rise by a further 0.96% in the short term.

For smoker and enhanced annuity providers have increased their rates by an average of 0.68% and rates may rise by a further 1.82% 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   86%
annuity rates no change   0%
annuity rates decrease   14%
Increases of:
up to 5.7%

 

Decreases of:
up to -4.0%

  Fig 1: Annuity rate changes for the whole market


For the month of December 86% of annuity rates increased by up to 5.7% with 0% remaining unchanged and 14% decreasing by as much as -4.0%

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 1.54%% during the month. The largest rise was for those aged 70 based on single and joint life for both level and escalating rates up by as much as 5.73% for the month. The largest decrease was for those aged 75 on a 50% joint life basis down by -1.27% 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 0.68% for the month on average. The largest rise was for those aged 60 to 70 on a single life, 3% escalation the rates up by 2.50% whereas the largest fall was for those aged 55 on a 50% joint life, 3% escalating basis down by -4.00%.

For the latest updates see Annuity Rates Review.

Changes to the 15-year gilt yields

The yields change for the month from 1.50% to 1.75% or 25 basis point. 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 - January 2018
Day Rate (%) Change (bp*)
2 1.59 +9
3 1.53 -6
4 1.54 +1
5 1.55 +1
8 1.54 -1
9 1.59 +5
10 1.59 0
11 1.60 +1
12 1.61 +1
15 1.60 -1
16 1.58 -2
17 1.59 +1
18 1.62 +3
19 1.62 0
22 1.64 +2
23 1.63 -1
24 1.68 +5
25 1.68 0
26 1.70 +2
29 1.70 0
30 1.71 +1
31 1.75 +4
  Table 1: Daily 15-year gilt yields and changes
* bp - basis points


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Enhanced annuity rates up as central banks signal interest rate rise
Annuity Rates
  Age Single Joint  
  55 £4,201 £4,028  
  60 £4,733 £4,405  
  65 £5,546 £5,049  
  70 £6,286 £5,591  
£100,000 purchase, level rates, standard
Unisex rates and joint life basis
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