Enhanced annuity rates down slightly

Providers of enhanced annuity rates decreased their rates by 0.94% on average during the month of August. Gilt yields were unchanged but volatile having started at 2.28% and reduced to 2.09% as investors moved funds to safe havens such as US Treasury bonds, German Bunds and UK government bonds and gilts.

Standard providers fractionally lower by 0.01% and we would expect to see a fractional increase of 0.01% in the short term and in the medium term of 3 months annuity rates will decrease by 2.51% if yields do not improve further.

Smoker and enhanced annuity providers decreased their rates slightly by 0.94% on average with an increase of 0.94% possible in the short term and in the medium term of 3 months we can expect a decrease of 3.32%.

Equity markets started at 6,696 and decreased by 448 points to end at 6,248.

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   0%   58%   42% Increases of: up to 0.0%   Decreases of: up to 1.8%

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 - August 2015 Mon 3rd Tues 4th Wed 5th Thurs 6th Fri 7th 2.26%   0.02 2.25%   0.01 2.32%   0.07 2.29%   0.03 2.20%   0.09 Mon 10th Tues 11th Wed 12th Thurs 13th Fri 14th 2.29%   0.09 2.25%   0.04 2.19%   0.06 2.24%   0.05 2.25%   0.01 Mon 17th Tues 18th Wed 19th Thurs 20th Fri 21st 2.22%   0.03 2.27%   0.05 2.24%   0.03 2.16%   0.08 2.09%   0.07 Mon 24th Tues 25th Wed 26th Thurs 27th Fri 28th 2.14%   0.05 2.21%   0.07 2.26%   0.05 2.28%   0.02 2.28%

Fig 2: Daily 15-year gilt yields and changes