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8 February 2019 last updated

Pension annuities flat despite China reporting slow growth

15-year gilt yields chart
Based on figures for January 2019
Latest gilt yield chart

January 2019 Review

Pension annuities remain flat as gilt yields volatile with investor optimism that the US would end the tariffs as China reports slowing growth.

Standard rates:  
annuity rates change 0.09%
Enhanced rates:  
annuity rates change 0.04%
Gilt yields:  
annuity rates change 7 basis point

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Yields volatile due to China's economy

Pension annuities from providers remain flat for the month of January waiting for gilt yields to settle after a volatile month.

Gilt yields surge during the month of January with as the US discusses an end the tariffs on China
and later slides with fears of an economic slowdown as China reports slower growth.

The Chinese economy had growth of 6.6% in 2018 which was the slowest growth rate for 28 years. The International Monetary Fund has reduced growth expectations for China in 2019 to 3.5% as quantitative easing from the government has failed to stop a decline in growth.

The 15-year gilt yield decreased by 7 basis points to 1.43% during January 2019 with providers of standard annuities decreasing rates slightly by an average -0.09% for this month and we would expect rates to decrease by -0.61% in the short term if yields do not fall.

For smoker and enhanced annuity providers have decreased their rates by an average of -0.04% and rates may fall by -0.66% 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   1%
annuity rates no change   91%
annuity rates decrease   8%
Increases of:
up to 0.5%


Decreases of:
up to -1.6%

  Fig 1: Annuity rate changes for the whole market

For the month 1% of annuity rates increased by up to 0.5% with 91% remaining unchanged and 8% decreasing by up to -1.6%.

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

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 the latest updates see Annuity Rates Review.

Changes to the 15-year gilt yields

The yields change for the month from 1.50% to 1.43% or 7 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 2019
Day Rate (%) Change (bp*)
2 1.43 -7
3 1.39 -4
4 1.47 +11
7 1.45 -2
8 1.48 +3
9 1.46 -2
10 1.48 +2
11 1.50 +2
14 1.49 -1
15 1.46 -3
16 1.50 +4
17 1.54 +4
18 1.55 +1
21 1.55 0
22 1.52 -3
23 1.52 0
24 1.46 -6
25 1.52 +6
28 1.46 -6
29 1.47 +1
30 1.45 -2
31 1.43 -2
  Table 1: Daily 15-year gilt yields and changes
* bp - basis points

News related stories:
Annuity rates resist fall in yields with fear of US slowdown
Retirement income down 14% with falls in equity and gilt yields
Annuity income hit by volatility in global equity and gilts market
Pension annuities fall as US tariffs creates economic uncertainty
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  Age Single Joint  
  55 £5,736 £5,481  
  60 £6,132 £5,880  
  65 £6,860 £6,462  
  70 £7,678 £7,215  
£100,000 purchase, level rates, standard
Unisex rates and joint life basis
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