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9 November 2020 last updated

Annuities at risk with volatile gilts due to Covid-19 restrictions in Europe

Annuities at risk with volatile gilts
Standard rates:  
annuity rates change 0.17%
Enhanced rates:  
annuity rates change 0.45%
Gilt yields:  
annuity rates change 4 basis point
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15-year gilt yields chart - Based on figures for October 2020
Latest gilt yield chart

October 2020 Review

Gilt yields fall 17 basis points to 0.39% during the month as rsing cases of Covid-19 in Europe has seen greater restrictions in various countries. This is leading to nervous investors looking for the safety of Treasury Notes, Gilts and Bunds sending yields lower.

Gilt yields remain volatile as investors wait for an outcome of the fiscal stimulus deal as negotiations between the Democrats and the Trump administration has continued to make progress.

Find related news here:
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The 15-year gilt yields increase by 4 basis points to 0.49% during October after a volatile month.

Providers of standard annuities increased annuity rates by an average of 0.17% for this month and we would expect rates to rise by 0.23% in the short term if yields remain at current levels.

For smoker and enhanced annuity providers have reduced their rates by an average of -0.45% and rates and we would expect rates to rise by 0.85% 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   40%
annuity rates no change   23%
annuity rates decrease   27%
Increases of:
max 1.5%


Decreases of:
max -1.7%

  Fig 1: Annuity rate changes for the whole market

For the month 40% of annuity rates increased by up to 1.5% with 23% remaining unchanged and 27% decreasing by as much as to -1.7%.

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 0.45% to 0.49% or 4 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 - October 2020
Day Rate (%) Change (bp*)
1 0.47 +2
2 0.48 +1
5 0.53 +5
6 0.53 0
7 0.54 +1
8 0.53 -1
9 0.52 -1
12 0.52 0
13 0.47 -5
14 0.44 -3
15 0.40 -4
16 0.41 +1
19 0.39 -2
20 0.41 +2
21 0.47 +6
22 0.51 +4
23 0.51 0
26 0.51 0
27 0.45 -6
28 0.43 -2
29 0.45 +2
30 0.49 +4
  Table 1: Daily 15-year gilt yields and changes
* bp - basis points

News related stories:
Fear of new Covid-19 restrictions in Europe sends gilt yields lower
Providers raise annuity rates as gilt yields bounce 22 basis points
Pension annuities fall as Federal Reserve hold rates until 2022
Annuity Rates
  Age Single Joint  
  55 £4,574 £4,142  
  60 £4,961 £4,610  
  65 £5,691 £5,238  
  70 £6,478 £6,098  
£100,000 purchase, level rates, standard
Unisex rates and joint life basis
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