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4 September 2015 last updated
Gilt yields remain volatile with concerns over Chinese economic slowdown
15-year gilt yields chart
Based on figures for August 2015
15-year gilt yields August 2015

After a volatile month with the 15-year gilt yields falling 21 basis points they have ended unchanged following concerns that the Chinese economy is slowing.

Standard rates:  
annuity rates up 0.01%
Enhanced rates:  
annuity rates up 0.94%
Gilt yields:  
  0 basis point

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Enhanced annuity rates down slightly

Providers of enhanced annuity rates decreased their rates by 0.94% on average during the month of August. Gilt yields were unchanged but volatile having started at 2.28% and reduced to 2.09% as investors moved funds to safe havens such as US Treasury bonds, German Bunds and UK government bonds and gilts.

Standard providers fractionally lower by 0.01% and we would expect to see a fractional increase of 0.01% in the short term and in the medium term of 3 months annuity rates will decrease by 2.51% if yields do not improve further.

Smoker and enhanced annuity providers decreased their rates slightly by 0.94% on average with an increase of 0.94% possible in the short term and in the medium term of 3 months we can expect a decrease of 3.32%.

Equity markets started at 6,696 and decreased by 448 points to end at 6,248.

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 increase   0%
annuity rates no change   58%
annuity rates decrease   42%
Increases of:
up to 0.0%

  Decreases of:
up to 1.8%
  Fig 1: Annuity rate changes for the whole market

The majority of rates increased with 0% rising, 58% remaining unchanged and 42% decreasing.

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

Standard annuities decreased fractionally this month (virtually blank chart) for all annuities with the majority of rates remaining unchanged.

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 enhanced and smoker rates providers decreased all annuities by up to 1.8% for those aged 75 and escalating rates. The majority of rates were lower by between 0.55% to 1.40%. For the latest updates see Annuity Rates Review.

Changes to the 15-year gilt yields

The yields change for the month was from 2.28% to 2.28% or 0 basis points. 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 2015
Mon 3rd Tues 4th Wed 5th Thurs 6th Fri 7th
gilt yields down   0.02
gilt yields down   0.01
gilt yields up   0.07
gilt yields down   0.03
gilt yields down   0.09
Mon 10th Tues 11th Wed 12th Thurs 13th Fri 14th
gilt yields up   0.09
gilt yields down   0.04
gilt yields down   0.06
gilt yields up   0.05
gilt yields up   0.01
Mon 17th Tues 18th Wed 19th Thurs 20th Fri 21st
gilt yields down   0.03
gilt yields up   0.05
gilt yields down   0.03
gilt yields down   0.08
gilt yields down   0.07
Mon 24th Tues 25th Wed 26th Thurs 27th Fri 28th
gilt yields up   0.05
gilt yields up   0.07
gilt yields up   0.05
gilt yields up   0.02
gilt yields no change
  Fig 2: Daily 15-year gilt yields and changes

News related stories:
Pension income lower as FTSE-100 index falls with Chinese slowdown
Annuities could rise as yields boosted by EU and US bond sell off
Best annuities could rise as Federal Reserve delays raising rates
UK annuities could rise as gilt yields make strong recovery
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