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4 August 2020 last updated

Gilt yields lower with concern of global economy as Covid-19 cases rise

Gilt yields fall due to Covid-19
Standard rates:  
annuity rates change 0.59%
Enhanced rates:  
annuity rates change 1.04%
Gilt yields:  
annuity rates change 6 basis point
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15-year gilt yields chart - Based on figures for July 2020
Latest gilt yield chart

July 2020 Review

The rise in Covid-19 cases with more countries imposing lockdowns could impact the global economy sending investors to the safety of bonds and gilts.

The 15-year gilt yields have reduced to 0.32% during the month, the lowest level since the start of the UK lockdown in March. This may have an impact on providers of pension annuities as yields have remained under 0.40% during July and main remain at this exceptionally low level if Coronavirus cases continue to rise.

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The 15-year gilt yields rise by 6 basis points to 0.34% during July 2020 as Coronavirus cases rise globally.

Providers of standard annuities increased annuity rates by an average of 0.59% for this month and we would expect rates to fall by -1.19% in the short term if yields remain at current levels.

For smoker and enhanced annuity providers have increased their rates by an average of 1.04% and rates and we would expect rates to fall -1.64% 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   82%
annuity rates no change   11%
annuity rates decrease   7%
Increases of:
max 3.9%


Decreases of:
max -1.6%

  Fig 1: Annuity rate changes for the whole market

For the month 82% of annuity rates increased by up to 3.9% with 11% remaining unchanged and 7% decreasing by as much as 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 0.40% to 0.34% or 6 basis point. Table 1 below shows the daily 15-year gilt yields and the increase or decrease from the previous day's close:

15-Year Gilt Yields - July 2020
Day Rate (%) Change (bp*)
1 0.43 +3
2 0.40 -3
3 0.40 0
6 0.37 -3
7 0.38 +1
8 0.39 +1
9 0.37 -2
10 0.36 -1
13 0.39 +3
14 0.36 -3
15 0.38 +2
16 0.36 -2
17 0.38 +2
20 0.37 -1
21 0.36 -1
22 0.35 -1
23 0.35 0
24 0.37 +2
27 0.34 -3
28 0.33 -1
29 0.35 +2
30 0.32 -3
31 0.34 +2
  Table 1: Daily 15-year gilt yields and changes
* bp - basis points

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  60 £4,102 £3,823  
  65 £4,825 £4,358  
  70 £5,675 £5,156  
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Unisex rates and joint life basis
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