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4 February 2016 last updated
Gilt yields lower by 36 basis points with global slowdown fears
15-year gilt yields chart
Based on figures for January 2016
15-year gilt yields October 2015
 

15-year gilt yields are lower by 36 basis points as investors seek safe havens following fears of a global economic slowdown which could increase pressure on annuity rates.

Standard rates:  
annuity rates up 0.69%
Enhanced rates:  
annuity rates up 0.87%
Gilt yields:  
annuity rates up 36 basis point



 
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Annuity rates higher despite lower yields

The majority of annuity rates increased last month despite the significant fall in 15-year gilt yields decreasing by 36 basis points.

In part this was due to providers reducing annuity rates the previous month due to Solvency 2 giving them more margin to make small improvements.

Standard providers increased rates by 0.69% and we would expect to see annuities fall by a further 1.05% in the long term. Smoker and enhanced annuity providers increased their rates by 0.87% on average and in the long term rates may rise by 0.22%.


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   80%
annuity rates no change   14%
annuity rates decrease   6%
Increases of:
up to 2.4%

  Decreases of:
up to 1.2%
  Fig 1: Annuity rate changes for the whole market


The majority of rates increased with 80% rising, 14% remaining unchanged and 6% 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


The majority of standard annuities increased by up to 2.4% during the month although most of the change was less than 1.0%. Only 100% joint life annuities reduced slightly by 0.72%

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 increased by up to 2.0% although the majority improved by about 1.0%.

For the latest updates see Annuity Rates Review.

Changes to the 15-year gilt yields

The yields change for the month was from 2.29% to 1.93% or 36 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 - January 2016
        Fri 1st
         
Mon 4th Tues 5th Wed 6th Thurs 7th Fri 8th
2.21%
gilt yields down   0.08
2.20%
gilt yields down   0.01
2.14%
gilt yields down   0.06
2.15%
gilt yields up   0.01
2.14%
gilt yields down   0.01
Mon 11th Tues 12th Wed 13th Thurs 14th Fri 15th
2.14%
gilt yields no change
2.11%
gilt yields down   0.03
2.10%
gilt yields down   0.01
2.11%
gilt yields up   0.01
2.03%
gilt yields down   0.08
Mon 18th Tues 19th Wed 20th Thurs 21st Fri 22nd
2.07%
gilt yields up   0.04
2.08%
gilt yields up   0.01
2.00%
gilt yields down   0.08
2.04%
gilt yields up   0.04
2.08%
gilt yields up   0.04
Mon 25th Tues 26th Wed 27th Thurs 28th Fri 29th
2.05%
gilt yields down   0.03
2.04%
gilt yields down   0.01
2.05%
gilt yields up   0.01
2.03%
gilt yields down   0.02
1.93%
gilt yields down   0.10
  Fig 2: Daily 15-year gilt yields and changes


News related stories:
Annuity income lower as markets fall on global slowdown fears
Impaired annuities lower by up to 6% ahead of Solvency 2 start date
Gilt yields and equities fall as Federal Reserve unclear about rate rise
Best annuities could rise as Federal Reserve delays raising rates
UK annuities could rise as gilt yields make strong recovery
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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