Legal & General have reduced their best annuity rates by 2.3% after the rapid fall in gilt yields last month after the Federal Reserve and US debt ceiling forced investors to move funds to safe havens.

Annuity rates are primarily based on the 15-year gilt yields which reduced from a high of 3.38% to close at 3.09% last month.

As a general rule a 29 basis point fall would mean annuity rates will reduce by 2.9%. Standard annuity rates did follow yields to lower levels immediately and as a result were exposed to future falls.

The fall in yields followed an unexpected delay in the tapering of the $85 billion a month stimulus package which should have been tapered from September by the Federal Reserve.

There had been a rise in yields as investors moved funds out of bonds and gilts ahead of the decision and this delay left the market confused about the future direction which started a buy back of bonds forcing yields lower ahead of the debt ceiling crisis.