Annuity rates remain steady in uncertain markets

Equity and gilts market end the month about where they started even with significant volatility following further fears of global economic slowdown.

Annuity rates were generally unchanged or with small increases and decreases after the 15-year gilt yields falling to their all time low before recovering to be only 1 basis point down for the month.

Standard providers decreased rates by 0.08% and we would expect to see annuities fall by a further 0.93% in the medium term. Smoker and enhanced annuity providers increased their rates by 0.09% on average and in the medium term rates may fall by 1.07%.

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   42%   35%   23% Increases of: up to 0.4%   Decreases of: up to 4.6%

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 - February 2016 Mon 1st Tues 2nd Wed 3rd Thurs 4th Fri 5th 1.97%   0.04 1.92%   0.05 1.91%   0.01 1.95%   0.04 1.93%   0.02 Mon 8th Tues 9th Wed 10th Thurs 11th Fri 12th 1.81%   0.12 1.81% 1.82%   0.01 1.77%   0.05 1.83%   0.06 Mon 15th Tues 16th Wed 17th Thurs 18th Fri 19th 1.82%   0.01 1.83%   0.01 1.87%   0.04 1.85%   0.02 1.83%   0.02 Mon 22nd Tues 23rd Wed 24th Thurs 25th Fri 26th 1.81%   0.02 1.84%   0.04 1.80%   0.05 1.82%   0.02 1.84%   0.02 Mon 29th         1.92%   0.08

Fig 2: Daily 15-year gilt yields and changes