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5 May 2017 last updated
Annuities fall further as geopolitical worries send yields lower
15-year gilt yields chart
Based on figures for April 2017
Latest gilt yield chart
 

Annuities are lower for a second month in a row as geopolitical worries over the elections in France and US conflict with Syria and North Korea send investors to safe havens.

Standard rates:  
annuity rates up 1.81%
Enhanced rates:  
annuity rates up 1.24%
Gilt yields:  
annuity rates up 3 basis point



 
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Providers lower annuity rates in line with yields

The 15-year gilt yields decreased by only 3 basis points to 1.46% during the month and dipped lower to 1.37% due to geopolitical uncertainty after worries over the elections in France, the US conflict with Syria and tensions with North Korea send investors to safe havens of gilts and bonds.

Over the medium term of three months yields are 33 basis points lower compared to the high for the year reached on 26 January of 1.88% with standard providers decreased rates by an average of -5.25% and we would expect in the medium term rates may increase further by 1.95%.

For smoker and enhanced annuity providers decreased their rates by an average of -4.28% on average and in the short term rates may increase by 0.98%.

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   0%
annuity rates no change   0%
annuity rates decrease   100%
Increases of:
up to 0%

  Decreases of:
up to 3.4%
  Fig 1: Annuity rate changes for the whole market


For the month of April 0% of annuity rates increased with 0% remaining unchanged and 100% decreasing by no more than 3.4%.

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


Standard annuities decreased by an average of -1.81% during the month. For those aged 75 buying a single life or joint life on a 3% escalating basis with decreases of up to -3.4%. The highest decrease was for those aged 70 to 75 on a single life and 100% joint life and level rate decreasing by -3.0% to 3.4%.

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 enhanced and smoker providers rates decreased by an average of -1.24% with a larger fall of -1.8% for those aged 70 to 75 buying single life, on a level, 3% escalating and 10 year guarantee basis.

For the latest updates see Annuity Rates Review.

Changes to the 15-year gilt yields

The yields change for the month was from 1.49% to 1.46% or 3 basis points. Fig 2 below shows the daily 15-year gilt yields and the increase or decrease from the previous day's close:



15-Year Gilt Yields - April 2017
Day Rate (%) Change (bp*)
3 1.41 -8
4 1.43 +2
5 1.45 +2
6 1.45 0
7 1.44 -1
10 1.43 -1
11 1.41 -2
12 1.41 0
13 1.41 0
18 1.37 -4
19 1.42 +5
20 1.42 0
21 1.40 2
24 1.46 +6
25 1.46 0
26 1.47 +1
27 1.45 -2
28 1.46 +1
  Table 1: Daily 15-year gilt yields and changes
* bp - basis points

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Annuity Rates
  Age Single Joint  
  55 £4,066 £3,782  
  60 £4,544 £4,240  
  65 £5,246 £4,794  
  70 £6,045 £5,433  
£100,000 purchase, level rates, standard
Unisex rates and joint life basis
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