Strong rise in rates from enhanced providers

Providers of smoker and enhanced annuities aggressively increase rates by up to 8.0% as the 15-year gilt yields remain high during the month and up 19 basis points for the month.

Yields improved after bond markets were hit around the globe as the European Central Bank (ECB) expected the eurozone's recovery to continue. Investors sold bonds lowering the price with the 10-year German Bunds gaining 19 basis points leading the 10-year US Treasury notes rising 10 point gain. The world markets are being driven by Europe after the ECB launched quantitative easing.

Standard providers were higher by an average of 1.69% and we would expect to see an increase of 0.21% in the short term and in the medium term of 3 months annuity rates will decrease by 0.45% if yields do not improve further.

Smoker and enhanced annuity providers increased their rates by 5.21% on average with a decrease of 3.31% possible in the short term and in the medium term of 3 months we can expect a decrease of 3.31%.

Equity markets started at 6,984 and increased by 463 points to end at 6,521 after concerns over a Greek default.

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   98%   0%   2% Increases of: up to 8.0%   Decreases of: up to 0.5%

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

15-Year Gilt Yields - June 2015 Mon 1st Tues 2nd Wed 3rd Thurs 4th Fri 5th 2.25%   0.04 2.34%   0.09 2.49%   0.15 2.39%   0.10 2.45%   0.06 Mon 8th Tues 9th Wed 10th Thurs 11th Fri 12th 2.44%   0.01 2.49%   0.05 2.51%   0.02 2.46%   0.05 2.41%   0.04 Mon 15th Tues 16th Wed 17th Thurs 18th Fri 19th 2.44%   0.03 2.40%   0.04 2.46%   0.06 2.50%   0.04 2.42%   0.08 Mon 22nd Tues 23rd Wed 24th Thurs 25th Fri 26th 2.52%   0.10 2.53%   0.01 2.51%   0.02 2.53%   0.02 2.56%   0.03 Mon 29th Tues 30th       2.43%   0.13 2.40%   0.03

Fig 2: Daily 15-year gilt yields and changes