Gilt yields at highest this year as Labour Budget raises £50bn in extra debt

15-year gilt yields chart - Based on figures for October 2024

Annuity Rates UK - October 2024 review

The 15-year gilt yields increased 46 basis points to the highest this year of 4.80% on 31 October 2024 before ending the month at 4.72%.

The rise in gilt yields is due to changes in the Budget regarding the basis of borrowing, changing this from public sector net debt excluding the Bank of England to public sector net financial liabilities (PSNFL).

This allows the Chancellor to access a further £50 billion per year in extra borrowing for infrastructure investments such as transport, electricity networks and power generation schemes.

Providers increased annuity rates in October as the higher borrowing of £50bn each year means the Bank of England are likely to keep interest rates higher for longer.

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Providers of standard annuities increased all annuity rates by an average of +3.23% this month and we would expect rates to rise by +0.57% in the short term if yields remain at current levels.

For smoker and enhanced annuity providers increased all their rates by an average of +1.89% and we would expect rates to rise by +1.91% 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   100%   0%   0% Increases of: max 5.8%   Decreases of: max -0.0%

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