Gilt yields fall as investors seek safe havens with spread of Delta variant

15-year gilt yields chart - Based on figures for July 2021

Annuity Rates UK - July 2021 review

The 15-year gilt yields have reduced 21 basis points to 0.86% following the rapid spread of the Delta variant coronavirus in the US and fear this could impact an economic recovery.

In uncertain times investors seek the safety of government security such as Treasury notes, German bunds of UK gilts sending the price higher and yields lower.

As annuity rates are mainly based on the 15-year gilt yields, providers have reduced annuity rates across the board at least in the short term.

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Providers of standard annuities reduced annuity rates by an average of -1.47% for this month and we would expect rates to fall by -0.63% in the short term if yields remain at current levels.

For smoker and enhanced annuity providers have reduced their rates by an average of -0.82% and rates and we would expect rates to fall by -1.28% 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   4%   14%   81% Increases of: max 0.7%   Decreases of: max -3.3%

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