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8 March 2016 last updated
Volatility in 15-year gilt yields as global equity markets fall
15-year gilt yields chart
Based on figures for February 2016
Latest gilt yield chart
 

As equity markets fall with fear of a global economic slowdown investors seek the safety of government bonds and gilts sending 15-year gilt yields close to the all time low of 1.68% before recovering.

Standard rates:  
annuity rates up 0.1%
Enhanced rates:  
annuity rates up 0.1%
Gilt yields:  
annuity rates up 1 basis point



 
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Annuity rates remain steady in uncertain markets

Equity and gilts market end the month about where they started even with significant volatility following further fears of global economic slowdown.

Annuity rates were generally unchanged or with small increases and decreases after the 15-year gilt yields falling to their all time low before recovering to be only 1 basis point down for the month.

Standard providers decreased rates by 0.08% and we would expect to see annuities fall by a further 0.93% in the medium term. Smoker and enhanced annuity providers increased their rates by 0.09% on average and in the medium term rates may fall by 1.07%.

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   42%
annuity rates no change   35%
annuity rates decrease   23%
Increases of:
up to 0.4%

  Decreases of:
up to 4.6%
  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 0.4% during the month and only people aged 75 with single life, 3% escalating annuities reduced by 4.64%.

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 remained unchanged or decreased slightly although for people aged 65 with a 50% joint life, 3% escalating annuity the rates reduced by 2.30%.

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 1.92% or 1 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 - February 2016
Mon 1st Tues 2nd Wed 3rd Thurs 4th Fri 5th
1.97%
gilt yields up   0.04
1.92%
gilt yields down   0.05
1.91%
gilt yields down   0.01
1.95%
gilt yields up   0.04
1.93%
gilt yields down   0.02
Mon 8th Tues 9th Wed 10th Thurs 11th Fri 12th
1.81%
gilt yields down   0.12
1.81%
gilt yields no change
1.82%
gilt yields up   0.01
1.77%
gilt yields down   0.05
1.83%
gilt yields up   0.06
Mon 15th Tues 16th Wed 17th Thurs 18th Fri 19th
1.82%
gilt yields down   0.01
1.83%
gilt yields up   0.01
1.87%
gilt yields up   0.04
1.85%
gilt yields down   0.02
1.83%
gilt yields down   0.02
Mon 22nd Tues 23rd Wed 24th Thurs 25th Fri 26th
1.81%
gilt yields down   0.02
1.84%
gilt yields up   0.04
1.80%
gilt yields down   0.05
1.82%
gilt yields up   0.02
1.84%
gilt yields up   0.02
Mon 29th        
1.92%
gilt yields up   0.08
       
  Fig 2: Daily 15-year gilt yields and changes


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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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