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11 October 2019 last updated

Yields recover after US considers limited trade deal with China

Yields recover from all time low
 
Standard rates:  
annuity rates change 1.31%
Enhanced rates:  
annuity rates change 1.65%
Gilt yields:  
annuity rates change 0 basis point
 
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15-year gilt yields chart - Based on figures for September 2019
Latest gilt yield chart

September 2019 Review

Standard annuity rates are up by 1.31% for September following the 0 basis point change in the 15-year gilt yields last month to 0.71%.

The lowest yield ever recorded was on 3 September at 0.566%.

Yields reached an all time low due to trade tensions between the US and China and uncertainty over Brexit sending investors to safe havens. With news that Donald Trump would consider a limited trade deal with China gilt yields re coved to 0.95% before returning to 0.71% and no change for the month.

The 15-year gilt yield remained unchanged with 0 basis points movement to 0.71% during September 2019 with providers of standard annuities increasing rates by an average 1.31% for this month and we would expect rates to fall by -1.31% in the short term if yields remain at current levels.

For smoker and enhanced annuity providers have decreased their rates by an average of -1.65% and rates may increase by 1.65% 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   42%
annuity rates no change   9%
annuity rates decrease   49%
Increases of:
max 5.2%

 

Decreases of:
max -3.5%

  Fig 1: Annuity rate changes for the whole market


For the month 42% of annuity rates increased by up to 5.2% with 9% remaining unchanged and 49% decreasing by up to -3.5%.

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 0.71% to 0.71% or 0 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 - September 2019
Day Rate (%) Change (bp*)
2 0.63 -8
3 0.61 -2
4 0.69 +8
5 0.83 +14
6 0.73 -10
9 0.81 +8
10 0.85 +4
11 0.84 -1
12 0.86 +2
13 0.95 +9
16 0.87 -8
17 0.87 0
18 0.82 -5
19 0.82 0
20 0.82 0
23 0.74 -8
24 0.72 -1
25 0.73 +1
26 0.72 -1
27 0.72 0
30 0.71 -1
  Table 1: Daily 15-year gilt yields and changes
* bp - basis points

News related stories:
UK enhanced annuities rise with stronger data from China and eurozone
Enhanced annuity rates down over 3% as investors seek safe havens
Annuities fall with lower gilt yields after Brexit uncertainty
UK annuities could rise as investors leave safe havens
Gilt yields rise as Trump delays tariff on $200bn China trade
Annuity Rates
  Age Single Joint  
  55 £4,082 £3,905  
  60 £4,490 £4,182  
  65 £5,205 £4,869  
  70 £5,979 £5,463  
£100,000 purchase, level rates, standard
Unisex rates and joint life basis
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