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1 July 2016 last updated
Brexit vote results in collapse of gilt yields and annuity rates
15-year gilt yields chart
Based on figures for June 2016
Latest gilt yield chart
 

The Brexit vote in the EU Referendum has resulted in the 15-year gilt yields fall 52 basis points in a week to an all time low of 1.41% causing providers to reduce annuity rates and further falls are expected.

Standard rates:  
annuity rates up 2.60%
Enhanced rates:  
annuity rates up 3.14%
Gilt yields:  
annuity rates up 52 basis point



 
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Annuity rates up to 8% lower after Brexit vote

The 15-year gilt yields have collapsed by 52 basis points following the Brexit vote in the EU Referendum. Investors have been seeking safe havens such as bonds and gilts sending prices higher and yields lower. As a result providers of annuities have lowered their rates by up to 8% reducing the income for people retiring and taking their pension benefits.

Standard providers decreased rates by an average of 2.60% and we would expect in the short term rates may decrease further by 2.90%.

For smoker and enhanced annuity providers decreased their rates by an average of 3.14% on average and in the short term rates may decrease again by 2.36%.

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 no change   0%
annuity rates no change   0%
annuity rates decrease   100%
Increases of:
none

  Decreases of:
up to 7.7%
  Fig 1: Annuity rate changes for the whole market


For the month of June 100% of annuity rates decreased by up to 7.7% following the Brexit vote.

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 by an average of 2.60% during the month with a larger decrease of up to 7.7%% for those aged 55 buying single life 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 all rates decreased by an average of 3.14% with a larger decrease of up to 4.3% for those aged 60 buying single life 3% escalating annuities.

For the latest updates see Annuity Rates Review.

Changes to the 15-year gilt yields

The yields change for the month was from 1.93% to 1.41% or 52 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 - June 2016
Day Rate (%) Change (bp*)
1st 1.88 -5
2nd 1.87 -1
3rd 1.82 -5
6th 1.82 0
7th 1.82 0
8th 1.80 -2
9th 1.78 -2
10th 1.78 0
13th 1.76 -2
14th 1.70 -6
15th 1.66 -4
16th 1.70 +4
17th 1.72 +2
20th 1.83 +11
21st 1.87 +5
22th 1.88 +1
23rd 1.93 +5
24th 1.64 -29
27th 1.51 -13
28th 1.51 0
29th 1.48 -3
30th 1.41 -7
  Fig 2: Daily 15-year gilt yields and changes
* bp - basis points


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Annuity Rates
  Age Single Joint  
  55 £4,066 £3,782  
  60 £4,544 £4,240  
  65 £5,246 £4,794  
  70 £6,045 £5,433  
£100,000 purchase, level rates, standard
Unisex rates and joint life basis
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