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7 January 2019 last updated
Gilt yields lower as equities fall sharply with geopolitical tensions
15-year gilt yields chart
Based on figures for December 2018
Latest gilt yield chart
 

December 2018 Review

Gilt yields are lower for the month as investors retreat from equity markets following geopolitical tension between the US and China.

Standard rates:  
annuity rates change 0.10%
Enhanced rates:  
annuity rates change 0.18%
Gilt yields:  
annuity rates change 13 basis point



 
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Equities fall with fears for 2019 slowdown

Continued geopolitical tension between the US and China with a fears of a slowdown in the US economy has seen investors leave equities and back to the safety of bonds and gilts forcing yields lower.

The 15-year gilt yield decreased by 13 basis points to 1.50% during December 2018 with providers of standard annuities increasing rates by an average 0.10% for this month and we would expect rates to decrease by -1.40% in the short term if yields do not fall.

For smoker and enhanced annuity providers have increased their rates by an average of 0.18% and rates may fall by -1.48% 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   50%
annuity rates no change   23%
annuity rates decrease   27%
Increases of:
up to 1.2%

 

Decreases of:
up to -2.7%

  Fig 1: Annuity rate changes for the whole market


For the month 50% of annuity rates increased by up to 1.2% with 23% remaining unchanged and 27% decreasing by up to -2.7%.

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 1.63% to 1.50% or 13 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 - December 2018
Day Rate (%) Change (bp*)
3 1.56 -7
4 1.50 -6
5 1.53 +3
6 1.46 -7
7 1.46 0
10 1.36 -10
11 1.39 +3
12 1.49 +10
13 1.51 +2
14 1.45 -6
17 1.46 +1
18 1.46 0
19 1.49 +3
20 1.48 -1
21 1.52 +4
24 1.47 -5
27 1.51 +4
28 1.48 -3
31 1.50 +2
  Table 1: Daily 15-year gilt yields and changes
* bp - basis points


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Annuity Rates
  Age Single Joint  
  55 £3,640 £3,291  
  60 £4,102 £3,823  
  65 £4,825 £4,358  
  70 £5,675 £5,156  
£100,000 purchase, level rates, standard
Unisex rates and joint life basis
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