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4 October 2024 last updated

Gilt yields rise as US Fed cut interest rate by 0.5pc much larger than expected

Gilt yields and annuity rates rise
 
Standard rates:  
annuity rates change 0.25%
Enhanced rates:  
annuity rates change 0.79%
Gilt yields:  
annuity rates change 5 basis point
 
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15-year gilt yields chart - Based on figures for September 2024
Latest gilt yield chart

Annuity Rates UK - September 2024 review

The 15-year gilt yields are rising again to 4.34% after the US Federal Reserve cut interest rates for the first move in over four years by -0.5% on 18 September 2024 which was much larger than expected.

The new range of US interest rates is 4.75% to 5.00% whereas the Bank of England has only decreased interest rates to 5.0% and has suggested they are unlikely to reduce rates quickly.

Find related news here:
Annuities fall as gilt yields recover after Bank of England cut rates to 5pc
BoE cut rates to 5pc sends yields lower and threat to annuities

Providers of standard annuities increased annuity rates by an average of +0.25% this month and we would expect rates to increase by +0.25% in the short term if yields remain at current levels.

For smoker and enhanced annuity providers increased their rates by an average of +0.79% and we would expect rates to decrease by -0.29% 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   69%
annuity rates no change   8%
annuity rates decrease   23%
Increases of:
max 3.1%

 

Decreases of:
max 0.6%

  Fig 1: Annuity rate changes for the whole market


For the month 69% of annuity rates increased by up to +3.1% with 8% remaining unchanged and 23% decreasing by as much as -0.6%.

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 4.29% to 4.34% or +5 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 - September 2024
Day Rate (%) Change (bp*)
2 4.29 0
3 4.36 +7
4 4.30 -6
5 4.25 -5
6 4.24 -1
9 4.19 -5
10 4.16 -3
11 4.11 -4
12 4.12 +1
13 4.09 -3
16 4.08 -1
17 4.10 +2
18 4.17 +7
19 4.22 +5
20 4.22 0
23 4.25 +3
24 4.26 +1
25 4.32 +6
26 4.35 -1
27 4.32 -3
30 4.34 +2
  Table 1: Daily 15-year gilt yields and changes
* bp - basis points
News related stories:
Gilt yields fall 19 basis points ahead of BoE interest rate decision
Gilt yields reduce as UK inflation falls to Bank of England 2pc target
Annuity Rates
  Age Single Joint  
  55 £5,984 £5,700  
  60 £6,415 £6,061  
  65 £7,145 £6,714  
  70 £8,018 £7,475  
£100,000 purchase, level rates, standard
Unisex rates and joint life basis
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