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8 July 2019 last updated

UK annuities are lower as providers react to fall in gilt yields

UK annuities lower from providers
 
Standard rates:  
annuity rates change 2.19%
Enhanced rates:  
annuity rates change 2.28%
Gilt yields:  
annuity rates change 3 basis point
 
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15-year gilt yields chart - Based on figures for June 2019
Latest gilt yield chart

June 2019 Review

Standard annuity rates reduced by -2.19% for the month of June following the fall in the 15-year gilt yields last month. Yields remain low closing at 1.18% as investors are expecting the US Federal Reserve to reduce interest rates during the year.

The 15-year gilt yield decreased by -3 basis points to 1.18% during June 2019 is the lowest point reached since September 2016 with providers of standard annuities decreasing rates by an average -2.19% for this month and we would expect rates to rise by 1.89% in the short term if yields remain at current levels.

For smoker and enhanced annuity providers have decreased their rates by an average of -2.28% and rates may rise by 1.98% 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   1%
annuity rates no change   2%
annuity rates decrease   97%
Increases of:
max 0.2%

 

Decreases of:
max -2.0%

  Fig 1: Annuity rate changes for the whole market


For the month 2% of annuity rates increased by up to 0.2% with 2% remaining unchanged and 96% decreasing by up to -2.0%.

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 1.21% to 1.18% or 3 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 - June 2019
Day Rate (%) Change (bp*)
3 1.18 -3
4 1.22 +4
5 1.18 -4
6 1.14 -4
7 1.13 -1
10 1.15 +2
11 1.17 +2
12 1.19 +2
13 1.16 -3
14 1.16 0
17 1.17 +1
18 1.14 -3
19 1.18 +4
20 1.14 _4
21 1.17 +3
24 1.15 -2
25 1.13 -2
26 1.17 _4
27 1.17 0
28 1.18 +1
  Table 1: Daily 15-year gilt yields and changes
* bp - basis points

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Annuity Rates
  Age Single Joint  
  55 £4,574 £4,142  
  60 £4,961 £4,610  
  65 £5,691 £5,238  
  70 £6,478 £6,098  
£100,000 purchase, level rates, standard
Unisex rates and joint life basis
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