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2 July 2022 last updated

Gilt yields fall 33 basis points off peak due to investor recession fears

Gilt yields fall 33 basis points
 
Standard rates:  
annuity rates change 7.05%
Enhanced rates:  
annuity rates change 8.79%
Gilt yields:  
annuity rates change 19 basis point
 
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15-year gilt yields chart - Based on figures for June 2022
Latest gilt yield chart

Annuity Rates UK - June 2022 review

Gilt yields reduced by -33 basis points off the 2.92% eight year peak reached in June as investors fear a global recession, even though annuity rates increased by the largest amount on record for a single month.

After climbing strongly during June, the 15-year gilt yields dropped -33 basis points to 2.59% due to investor fear of recession following -18% to -34% falls in energy, metals and agriculture prices.

Global recession would mean lower consumer demand reducing inflation which could impact how quickly central banks raise base rates. As a result investors returned to safe havens such as Treasury notes, gilts and bunds.

Providers increased standard annuity rates rates by 23.93% for the the six months of 2022 and 23.84% for enhanced annuities. This compares to gilt yields rising 145 basis points when we would expect annuities to increase by only 14.5% over this period.

The correction of gilt yields from the peak in June due to recession fears increases the risk that annuities could fall if yields remain at current levels.

Find related news here:
Ban on Russian oil sends gilt yields to 2.4pc and higher annuity rates
Pension annuities up 23pc as base rates to rise due to higher oil prices

Providers of standard annuities increased annuity rates by an average of 7.05% for this month and we would expect rates to fall by -4.35% in the short term if yields remain at current levels.

For smoker and enhanced annuity providers have increased their rates by an average of 8.79% and we would expect rates to fall by -6.09% 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
annuity rates decrease   100%
annuity rates no change   0%
annuity rates decrease   0%
Increases of:
max 14.0%

 

Decreases of:
max -0.0%

  Fig 1: Annuity rate changes for the whole market


For the month 100% of annuity rates increased by up to 14.0% with 0% remaining unchanged and 0% decreasing by as much as to -0.0%.

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


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 the latest updates see Annuity Rates Review.

Changes to the 15-year gilt yields

The yields change for the month from 2.40% to 2.59% or 19 basis points. Table 1 below shows the daily 15-year gilt yields and the increase or decrease from the previous day's close:


15-Year Gilt Yields - June 2022
Day Rate (%) Change (bp*)
1 2.42 +2
2 2.41 -1
3 2.41 0
6 2.50 +9
7 2.45 -5
8 2.48 +3
9 2.53 +5
10 2.61 +8
13 2.71 +10
14 2.80 +9
15 2.69 -11
16 2.72 +3
17 2.72 0
20 2.84 +12
21 2.90 +6
22 2.76 -14
23 2.60 -16
24 2.58 -2
27 2.68 +10
28 2.76 +8
29 2.69 -7
30 2.59 -10
  Table 1: Daily 15-year gilt yields and changes
* bp - basis points
News related stories:
Annuity rates soar 19pc to highest level in six years as gilt yields rise
Gilt yields rise 20 basis points as Federal Reserve to raise rates
Annuity Rates
  Age Single Joint  
  55 £5,025 £4,644  
  60 £5,501 £5,102  
  65 £6,168 £5,832  
  70 £7,003 £6,583  
£100,000 purchase, level rates, standard
Unisex rates and joint life basis
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  Annuity Rates News:

Annuity rates rise but yields weaken
Annuity rates rise 7pc last month Annuity rates rise by a record 7% for a single month but gilt yields weaken
Yields fall 33 bp on recession fears
Gilt yields fall 33 basis points Gilt yields fall 33 basis points off 2.92% high as investors fear global recession
Ban on Russian oil sends yields up 2.4pc
Gilt yields rise over 2pc Yields rise 30 basis points the highest in seven years as Russian oil is banned
Annuity rates up 23pc with gilt yields
Gilt yields rise over 2pc Annuity rates rise 23% as investors expect higher oil prices and base rates
Annuity rates rise due to inflation fears
Gilt yields rise over 2pc 15-year gilt yields are up 28 basis points as investors expect rise in base rates

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