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6 October 2023 last updated

Gilt yields rise to 4.8pc as interest rates expected to remain higher for longer

Gilt yields rise to 4.8pc
 
Standard rates:  
annuity rates change 0.65%
Enhanced rates:  
annuity rates change 2.21%
Gilt yields:  
annuity rates change 17 basis point
 
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15-year gilt yields chart - Based on figures for September 2023
Latest gilt yield chart

Annuity Rates UK - September 2023 review

The 15-year gilt yields ends the month at a record high of 4.80% last attained 15 years ago. This exceeds the previous high in August of 4.63% and gilt yields briefly reached 5.01% on 17 August 2023 before ending the month at a lower level.

Enhanced annuities were higher by +2.21% on average after 15-year gilt yields rise 17 basis points as central banks remain hawkish to keep interest rates higher for longer. Standard annuities increased only +0.65% due to higher movements in previous months.

Inflation remains resilient with the US Federal Reserve and Bank of England indicating they may increase interest rates again before the end of the year.

Even so the 15-year gilt yields have only breached the five percent level briefly in August suggesting an upper limit. If this is the case annuity rates may be reaching the peak although could continue at this level for the remainder of the year.

Standard rates increased by only +0.65% after large improvements with annuities up +13.5% between April to August 2023.

Find related news here:
Annuities rise 1.5pc with record yields expecting higher interest rates
Gilt yields soar to record 5% as providers resist higher annuity rates

Our benchmark example for a 65 year old using £100,000 to purchase a single life and level annuity remains at a fourteen year high although if has decreased by -0.2%. The highest increase during September is for a smoker aged 55 year old purchasing a single life and 3% escalating annuity up +6.37%.

Providers of standard annuities increased annuity rates by an average of +0.65% for this month and we would expect rates to rise by +1.05% in the short term if yields remain at current levels.

For smoker and enhanced annuity providers have increased their rates by an average of +2.21% and we would expect rates to fall by -0.51% 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   73%
annuity rates no change   10%
annuity rates decrease   17%
Increases of:
max 6.3%

 

Decreases of:
max -1.2%

  Fig 1: Annuity rate changes for the whole market


For the month 73% of annuity rates increased by up to 6.3% with 10% remaining unchanged and 17% decreasing by as much as to -1.2%.

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 4.63% to 4.80% or +17 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 - September 2023
Day Rate (%) Change (bp*)
1 4.67 +4
4 4.74 +7
5 4.78 +4
6 4.81 +3
7 4.75 -6
8 4.71 -4
11 4.75 +4
12 4.71 -4
13 4.62 -9
14 4.58 -4
15 4.66 +8
18 4.68 +2
19 4.66 -2
20 4.56 -10
21 4.61 +5
22 4.59 -2
25 4.68 +9
26 4.70 +2
27 4.73 +3
28 4.83 +10
29 4.80 -3
  Table 1: Daily 15-year gilt yields and changes
* bp - basis points
News related stories:
Pension annuities fall after lower than expected inflation hits gilt yields
Gilt yields soar to record 5pc as providers resist higher annuity rates
Annuity Rates
  Age Single Joint  
  55 £6,132 £5,784  
  60 £6,532 £6,234  
  65 £7,247 £6,808  
  70 £8,170 £7,616  
£100,000 purchase, level rates, standard
Unisex rates and joint life basis
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