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7 May 2020 last updated

Annuity rates higher despite lower yields with global economic concerns

Annuity rates rise despite lower yields
Standard rates:  
annuity rates change 0.87%
Enhanced rates:  
annuity rates change 0.62%
Gilt yields:  
annuity rates change 18 basis point
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15-year gilt yields chart - Based on figures for April 2020
Latest gilt yield chart

April 2020 Review

Annuity rates increased as providers were more confident that the 15-year gilt yields are entering a period of stability following the extreme swings in March 2020.

The US Federal Reserve announced it could release $2.3 trillion in emergency business loans to support the economy with fiscal stimulus providing more support to growth recovering from the Coronavirus (Covid-19) crisis.

Yields reduce during the month over concerns about the global economic recovery post Coronavirus pandemic and oil future prices plunging to zero due to a lack of oil storage facilities.

Find related news here:
Annuity rates could rise after volatile gilt yields impact by Coronavirus
Gilt yields fall as coronavirus threatens slowdown for global growth
Pension annuities risk as oil price fall sends yields to all time lows

The 15-year gilt yields are lower by 18 basis points to 0.42% during April 2020 and was relatively stable compared to the previous month.

Providers of standard annuities increased annuity rates by an average of 0.87% for this month and we would expect rates to fall by -2.67% in the short term if yields remain at current levels.

For smoker and enhanced annuity providers have increased their rates by an average of 0.62% and rates and we would expect rates to decrease -2.42% 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   78%
annuity rates no change   8%
annuity rates decrease   14%
Increases of:
max 2.2%


Decreases of:
max -2.6%

  Fig 1: Annuity rate changes for the whole market

For the month 78% of annuity rates increased by up to 2.2% with 8% remaining unchanged and 14% decreasing by as much as to -2.6%.

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 0.60% to 0.42% or 8 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 - April 2020
Day Rate (%) Change (bp*)
1 0.53 -7
2 0.55 +2
3 0.54 -1
6 0.56 +2
7 0.60 +4
8 0.57 -3
9 0.47 -10
14 0.51 +4
15 0.49 -2
16 0.49 0
17 0.51 +2
20 0.53 +2
21 0.48 -5
22 0.50 +2
23 0.48 -2
24 0.48 0
27 0.49 +1
28 0.48 -1
29 0.47 -1
30 0.42 -5
  Table 1: Daily 15-year gilt yields and changes
* bp - basis points

News related stories:
Equity markets surge 15% as US Senate agrees $2tn stimulus package
Retirement income at decade low with panic selling on equity markets
Investors seek safety of gilts as global health emergency declared
Annuity Rates
  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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