Gilt yields chart at 2.44% on 10 May 2013
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Monthly analysis of annuities
Annuity rates are based primarily on the 15-year gilt yields so changes in gilt yields will affect annuities. Fig 1 above shows yields reached a low of 2.02% on 2 August 2012 due to continued uncertainty over the Eurozone.
The 15-year gilt yields had reduced significantly since June 2011 due to the financial crisis and this has had the effect of reducing annuity rates. As a general rule a 30 basis point rise in yields would increase annuities by 3% although the providers may take time to introduce these changes depending on their own strategies.
By 2013 yields were lower by 176 basis points since June 2011. On this basis annuity rates should have reduced by 17.6% although our benchmark example has decreased by 17.3% suggesting a decrease of 0.3% is likely in the long term . See Annuity Rates Review
for the latest updates.
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