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6 March 2023 last updated

Gilt yields rise 43 basis points as investors expect higher base rates

Gilt yields rise 43 basis points
 
Standard rates:  
annuity rates change 0.22%
Enhanced rates:  
annuity rates change 0.21%
Gilt yields:  
annuity rates change 43 basis point
 
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15-year gilt yields chart - Based on figures for February 2023
Latest gilt yield chart

Annuity Rates UK - February 2023 review

The 15-year gilt yields increased by 43 basis points to 4.13% which is the highest closing figure since September 2022. After the mini budget yields increaseed to a fourteen year high of 5.09 before falling back and closing at 4.24%.

Investors expect central banks to raise base rates with strong economic data and higher inflation in the US and Europe.

The Federal Reserve could be more hawkish about increase base rates in the next few months and other central banks are likely to follow to counter fall in currencies.

Find related news here:
Pension annuities could rise 4pc as Fed more hawkish with inflation
Gilt yields reduce 32 basis points with investor concerns for growth

Providers of standard annuities increased annuity rates by an average of +0.22% for this month and we would expect rates to rise by +4.08% in the short term if yields remain at current levels.

For smoker and enhanced annuity providers have increased their rates by an average of +0.21% and we would expect rates to rise by +4.09% 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
annuity rates decrease   77%
annuity rates no change   0%
annuity rates decrease   23%
Increases of:
max 3.0%

 

Decreases of:
max -5.3%

  Fig 1: Annuity rate changes for the whole market


For the month 77% of annuity rates increased by up to 3.0% with 0% remaining unchanged and 23% decreasing by as much as to -5.3%.

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


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 the latest updates see Annuity Rates Review.

Changes to the 15-year gilt yields

The yields change for the month from 3.70% to 4.13% or +43 basis points. Table 1 below shows the daily 15-year gilt yields and the increase or decrease from the previous day's close:


15-Year Gilt Yields - February 2023
Day Rate (%) Change (bp*)
1 3.68 -2
2 3.42 -26
3 3.49 +7
6 3.65 +16
7 3.69 +4
8 3.72 +3
9 3.71 -1
10 3.78 +7
13 3.81 +3
14 3.87 +6
15 3.85 -2
16 3.88 +3
17 3.91 +3
20 3.89 -2
21 4.00 +11
22 3.97 -3
23 3.97 0
24 4.09 +12
27 4.14 +5
28 4.13 -1
  Table 1: Daily 15-year gilt yields and changes
* bp - basis points
News related stories:
Annuity rates up 42pc last year and record levels of retirement income
Enhanced annuity rates up 5pc as gilt yields rise 50 basis points
Annuity Rates
  Age Single Joint  
  55 £6,132 £5,784  
  60 £6,532 £6,234  
  65 £7,247 £6,808  
  70 £8,170 £7,616  
£100,000 purchase, level rates, standard
Unisex rates and joint life basis
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