Gilt yields reduce to record lows as investors seek safe havens

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

August 2019 Review

Standard annuity rates reduced by -3.63% for August following the -27 basis point fall in the 15-year gilt yields last month to 0.71%, the lowest level ever recorded on 16 August of 0.669%.

The lowest yield ever recorded was on 3 September at 0.566%.

Yields are lower due to the continuing trade tensions between the US and China with President Trump to apply tariffs on the all remaining Chinese imports. Other geopolitical concerns sent investors to safe havens with Boris Johnson to extend the suspension of Parliament until 14 October 2019 just a couple of weeks before the deadline for the UK to leave the EU.

The 15-year gilt yields decreased by -27 basis points to 0.71% during August 2019 with providers of standard annuities decreasing rates by an average -3.63% for this month and we would expect rates to rise by 0.93% in the short term if yields remain at current levels.

For smoker and enhanced annuity providers have decreased their rates by an average of -2.70% and rates may remain level 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   0%   0%   99% Increases of: max 0.0%   Decreases of: max -7.9%

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