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7 May 2021 last updated

Gilt yields rise as GDP figures show US economy first quarter recovery

Yields recover from all time low
 
Standard rates:  
annuity rates change 0.35%
Enhanced rates:  
annuity rates change 1.39%
Gilt yields:  
annuity rates change 4 basis point
 
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15-year gilt yields chart - Based on figures for April 2021
Latest gilt yield chart

Annuity Rates UK - April 2021 review

The 15-year gilt yields bounce back from the falls during the month to end at 1.19% after improved gross domestic product (GDP) figures about the US economy.

There was a sharp increase in GDP for the first quarter indicating that the US economy was recovering to levels before the covid pandemic with investors moving out of bonds and gilts sending yields higher.

Find related news here:
Enhanced annuity rates up over 6pc as providers adjust for higher yields
Pension annuities rise 3.2pc as investors sell gilts and bonds

Providers of standard annuities reduced annuity rates by an average of -0.35% for this month and we would expect rates to fall by -0.05% in the short term if yields remain at current levels.

For smoker and enhanced annuity providers have reduced their rates by an average of -1.39% and rates and we would expect rates to rise by 0.99% in the medium 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   21%
annuity rates no change   29%
annuity rates decrease   50%
Increases of:
max 0.4%

 

Decreases of:
max -6.9%

  Fig 1: Annuity rate changes for the whole market


For the month 21% of annuity rates increased by up to 10.4% with 29% remaining unchanged and 50% decreasing by as much as to -6.9%.

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 1.23% to 1.19% 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 - April 2021
Day Rate (%) Change (bp*)
1 1.16 -7
6 1.15 -1
7 1.13 -2
8 1.11 -2
9 1.14 +3
12 1.14 0
13 1.13 -1
14 1.17 +4
15 1.09 -8
16 1.12 +3
19 1.11 -1
20 1.08 -3
21 1.10 +2
22 1.10 0
23 1.10 0
26 1.11 +1
27 1.13 +2
28 1.14 +1
29 1.19 +5
30 1.19 0
  Table 1: Daily 15-year gilt yields and changes
* bp - basis points

News related stories:
Gilt yields rise record amount of 60 basis points on inflation fears
Annuities set to rise 3pc as yields boosted by higher inflation forecast
Annuity rates higher as investors more optimistic for the economy
Annuity Rates
  Age Single Joint  
  55 £3,851 £3,569  
  60 £4,268 £3,973  
  65 £4,965 £4,581  
  70 £5,831 £5,274  
£100,000 purchase, level rates, standard
Unisex rates and joint life basis
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