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6 July 2018 last updated
Gilt yields volatile as ECB delays end of bond buying until December
15-year gilt yields chart
Based on figures for June 2018
Latest gilt yield chart
 

Annuities rise slightly during the month as investors were optimistic the ECB would confirm the process to end the asset purchase programme only to find the timetable has been pushed back.

Standard rates:  
annuity rates change 0.68%
Enhanced rates:  
annuity rates change 0.08%
Gilt yields:  
annuity rates change 3 basis point



 
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Gilt yields rise 3 basis points for the month

The 15-year gilt yields are higher by 3 basis points during the month after reaching a high of 1.69% and reducing back to 1.53%. The rise in yields was due to investors selling bonds in anticipation the European Central Bank (ECB) would confirm the end of the asset purchase programme only to find the timetable has been delayed until at least the summer of 2019.

The 15-year gilt yield increased by 3 basis points to 1.56% during June 2018 with providers of standard annuities increasing rates by an average 0.68% for this month and we would expect rates to fall by -0.98% in the short term if yields do not fall.

For smoker and enhanced annuity providers have increased their rates by an average of 0.08% and rates may fall by -0.38% in the short term if yields do not fall.

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   31%
annuity rates no change   61%
annuity rates decrease   8%
Increases of:
up to 5.3%

 

Decreases of:
up to -5.4%

  Fig 1: Annuity rate changes for the whole market


For the month of February 31% of annuity rates increased by up to 5.3% with 61% remaining unchanged and 8% decreasing by up to -5.4%.

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 0.68% during the month. The largest rise was for those aged 75 based on a single life with 3% escalation up by 5.3% for the month with the largest decrease for those aged 55 on a single life and and 50% joint life with 3% escalation basis down -5.4%.

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 0.08% for the month on average. The largest rise was for those aged 60 based on a 100% joint life up by 0.4% for the month with the largest decrease for those aged 55 on a 50% joint life with 3% escalating basis down -3.7%.

For the latest updates see Annuity Rates Review.

Changes to the 15-year gilt yields

The yields change for the month from 1.53% to 1.56% or 3 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 - June 2018
Day Rate (%) Change (bp*)
1 1.58 +5
4 1.59 +1
5 1.58 -1
6 1.66 +8
7 1.68 +2
8 1.68 0
11 1.69 +1
12 1.68 -1
13 1.64 -4
14 1.60 -4
15 1.61 +1
18 1.61 0
19 1.58 -3
20 1.60 +2
21 1.57 -3
22 1.61 +4
25 1.59 -2
26 1.59 0
27 1.54 -5
28 1.55 +1
29 1.56 +1
  Table 1: Daily 15-year gilt yields and changes
* bp - basis points


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Annuity Rates
  Age Single Joint  
  55 £4,358 £4,209  
  60 £4,839 £4,644  
  65 £5,613 £5,193  
  70 £6,292 £5,860  
£100,000 purchase, level rates, standard
Unisex rates and joint life basis
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