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6 September 2019 last updated

Gilt yields reduce to record lows as investors seek safe havens

Gilt yields reduce to record lows
 
Standard rates:  
annuity rates change 3.63%
Enhanced rates:  
annuity rates change 2.70%
Gilt yields:  
annuity rates change 27 basis point
 
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15-year gilt yields chart - Based on figures for August 2019
Latest gilt yield chart

August 2019 Review

Standard annuity rates reduced by -3.63% for August following the -27 basis point fall in the 15-year gilt yields last month to 0.71%, the lowest level ever recorded on 16 August of 0.669%.

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

Yields are lower due to the continuing trade tensions between the US and China with President Trump to apply tariffs on the all remaining Chinese imports. Other geopolitical concerns sent investors to safe havens with Boris Johnson to extend the suspension of Parliament until 14 October 2019 just a couple of weeks before the deadline for the UK to leave the EU.

The 15-year gilt yield decreased by -27 basis points to 0.71% during August 2019 with providers of standard annuities decreasing rates by an average -3.63% for this month and we would expect rates to rise by 0.93% in the short term if yields remain at current levels.

For smoker and enhanced annuity providers have decreased their rates by an average of -2.70% and rates may remain level 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   0%
annuity rates no change   0%
annuity rates decrease   99%
Increases of:
max 0.0%

 

Decreases of:
max -7.9%

  Fig 1: Annuity rate changes for the whole market


For the month 0% of annuity rates increased by up to 0% with 0% remaining unchanged and 100% decreasing by up to -7.9%.

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 0.98% to 0.71% or 27 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 - August 2019
Day Rate (%) Change (bp*)
1 0.95 -3
2 0.91 -4
5 0.86 -5
6 0.85 -1
7 0.81 -4
8 0.85 +4
9 0.82 -3
12 0.83 +1
13 0.81 -2
14 0.74 -7
15 0.70 -4
16 0.73 +3
19 0.76 +3
20 0.73 -3
21 0.75 +2
22 0.81 +6
23 0.79 -2
26 0.80 +1
27 0.74 -6
28 0.68 -4
29 0.67 -1
30 0.71 +4
  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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