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1 April 2016 last updated
Gilt yields remain stable as best annuity rates reduce
15-year gilt yields chart
Based on figures for March 2016
 

The 15-year gilt yields have returned to stability along with investor confidence in equities following uncertainty in the global economy and oil prices although annuity rates have reduced.

Standard rates:  
annuity rates up 3.94%
Enhanced rates:  
annuity rates up 3.35%
Gilt yields:  
annuity rates up 4 basis point



 
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Annuity rates reduce by impaired provider

Impaired annuity provider Just Retirement has reduced their rates by up to 4% to bring the market in-line with changes in gilt yields over the last year.

As providers of enhanced and impaired annuities dominate the conventional annuity market by offering lifestyle rates any change in their rates can have a wide ranging impact on all rates.

The 15-year gilt yields were up by 4 basis points on the month as investor confidence returns to the equity markets and a lower demand of the safety of gilts and bonds.

Standard providers decreased rates by 3.94% and we would expect to see annuities remain the same in the medium term. Smoker and enhanced annuity providers decreased their rates by 3.35% on average and in the medium term rates may fall by 0.70%.

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   1%
annuity rates no change   0%
annuity rates decrease   99%
Increases of:
up to 0.5%

  Decreases of:
up to 5.8%
  Fig 1: Annuity rate changes for the whole market


The majority of rates increased with 1% rising, 0% remaining unchanged and 99% 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


All standard annuities decreased by an average of 4.0% during the month with a larger decrease of over 5% for those aged 65-70 buying single life 3% escalating annuities and aged 75 buying 50% joint life and 3% escalating annuities.

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 providers rates the majority decreased ny an average of 3.35% with a larger decrease of over 5% for those aged 55 and 75 buying single life 3% escalating annuities. Only for those aged 60 buying 50% joint life with 3% escalating annuities had a small increase of 0.5%.

For the latest updates see Annuity Rates Review.

Changes to the 15-year gilt yields

The yields change for the month was from 1.92% to 1.96% or 4 basis point. 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 - March 2016
  Tues 1st Wed 2nd Thurs 3rd Fri 4th
 
1.98%
gilt yields up   0.06
2.00%
gilt yields up   0.02
1.96%
gilt yields down   0.04
2.02%
gilt yields up   0.06
Mon 7th Tues 8th Wed 9th Thurs 10th Fri 11th
2.03%
gilt yields up   0.01
1.93%
gilt yields down   0.10
2.00%
gilt yields up   0.07
2.04%
gilt yields up   0.04
2.06%
gilt yields up   0.02
Mon 14th Tues 15th Wed 16th Thurs 17th Fri 18th
2.05%
gilt yields down   0.01
2.04%
gilt yields down   0.01
2.04%
gilt yields no change
1.98%
gilt yields down   0.06
1.98%
gilt yields no change
Mon 21st Tues 22nd Wed 23rd Thurs 24th Fri 25th
2.00%
gilt yields up   0.02
1.99%
gilt yields down   0.01
1.98%
gilt yields down   0.01
2.00%
gilt yields up   0.02
 
Mon 28th Tues 29th Wed 30th Thurs 31st  
 
1.98%
gilt yields down   0.04
1.99%
gilt yields up   0.01
1.96%
gilt yields down   0.03
 
  Fig 2: Daily 15-year gilt yields and changes


News related stories:
Best annuity rates reduce by 4% from Just Retirement
Latest annuity rates could fall as gilt yields reach 12-month low
Annuity income lower as markets fall on global slowdown fears
Impaired annuities lower by up to 6% ahead of Solvency 2 start date
Annuity Rates
  Age Single Joint  
  55 £4,216 £3,974  
  60 £4,702 £4,423  
  65 £5,453 £5,013  
  70 £6,105 £5,482  
£100,000 purchase, level rates, standard
Unisex rates and joint life basis
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