Impaired annuities rise with higher yields and prospect of Brexit deal

15-year gilt yields chart - Based on figures for October 2019

October 2019 Review

Impaired annuities are up by 1.50% for October following the 15 basis point change in the 15-year gilt yields last month to 0.86%.

Yields recovered from a low point for the month of 0.65% as the prospect of a US-China limited trade deal and Prime Minister Boris Johnson moving closer with a Brexit deal to leave the EU.

The 15-year gilt yield rise 15 basis points to 0.86% during October 2019 with providers of standard annuities decreasing rates by an average -1.74% for this month and we would expect rates to rise by 3.24% in the short term if yields remain at current levels.

For smoker and enhanced annuity providers have increased their rates by an average of 1.50% and rates may remain unchanged at 0.0% in the short term if yields do not fall.

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   48%   10%   42% Increases of: max 7.7%   Decreases of: max -6.5%

Fig 1: Annuity rate changes for the whole market

Fig 2: Change in standard rates last month compared to gilt yields

Fig 3: Change in enhanced rates last month compared to gilt yields