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9 April 2019 last updated

Annuities fall with lower gilt yields after Brexit uncertainty

nnuities fall after Brexit uncertainty
 
Standard rates:  
annuity rates change 1.73%
Enhanced rates:  
annuity rates change 3.31%
Gilt yields:  
annuity rates change 28 basis point
 
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15-year gilt yields chart - Based on figures for March 2019
Latest gilt yield chart

March 2019 Review

Uncertainty over Brexit sends investors to safety of government bonds and gilts in March increasing the price and lowering yields with providers reducing rates for annuities.

The 15-year gilt yield increased by 28 basis points to 1.33% during March 2019 with providers of standard annuities decreasing rates by an average -1.73% for this month and we would expect rates to decrease by a further -1.07% in the short term if yields remain at current levels.

For smoker and enhanced annuity providers have decreased their rates by an average of -3.31% and rates may rise by 0.51% 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   0%
annuity rates no change   0%
annuity rates decrease   100%
Increases of:
up to 0.0%

 

Decreases of:
up to -5.0%

  Fig 1: Annuity rate changes for the whole market


For the month 0% of annuity rates increased with 0% remaining unchanged and 100% decreasing by up to -5.0%.

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 1.61% to 1.33% or 28 basis point. 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 - March 2019
Day Rate (%) Change (bp*)
1 1.60 -1
4 1.57 -3
5 1.58 +1
6 1.51 -7
7 1.47 -4
8 1.50 +3
11 1.48 -2
12 1.47 -1
13 1.52 +5
14 1.53 -1
15 1.51 -2
18 1.50 -1
19 1.47 -3
20 1.44 -3
21 1.35 -9
22 1.30 -5
25 1.28 -2
26 1.32 +2
27 1.33 +1
28 1.32 -1
29 1.33 +1
  Table 1: Daily 15-year gilt yields and changes
* bp - basis points

News related stories:
UK annuities could rise as investors leave safe havens
Gilt yields rise as Trump delays tariff on $200bn China trade
Retirement income recovers as US stocks lead equity rally
Pension annuities flat despite China reporting slow growth
Annuity Rates
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  60 £6,132 £5,880  
  65 £6,860 £6,462  
  70 £7,678 £7,215  
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