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10 February 2020 last updated

Investors seek safety of gilts as global health emergency declared

Investors seek safety of gilts with virus fears
 
Standard rates:  
annuity rates change 1.53%
Enhanced rates:  
annuity rates change 2.00%
Gilt yields:  
annuity rates change 31 basis point
 
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15-year gilt yields chart - Based on figures for January 2020
Latest gilt yield chart

January 2020 Review

Standard annuities decreased by -1.53% for January with 15-year gilt yields reducing 31 basis points as investors seek safe havens with concerns over the coronavirus and state of the global economy as the World Health Organization declares a global health emergency.

The 15-year gilt yield are lower by 31 basis points to 0.76% during January 2020 ending the year above one percent for the first time in six months.

Providers of standard annuities reduced annuity rates by an average of -1.53% for this month and we would expect rates to reduce by -1.57% in the short term if yields remain at current levels.

For smoker and enhanced annuity providers have decreased their rates by an average of -2.00% and rates and we would expect rates to increase -1.10% in the medium 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   4%
annuity rates decrease   96%
Increases of:
max 0.0%

 

Decreases of:
max -10.5%

  Fig 1: Annuity rate changes for the whole market


For the month 0% of annuity rates increased with 4% remaining unchanged and 96% decreasing by up to -10.5%.

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 1.07% to 0.76% or 31 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 - January 2020
Day Rate (%) Change (bp*)
2 1.02 -5
3 0.97 -5
6 1.00 +3
7 1.01 +1
8 1.05 +4
9 1.06 +1
10 1.01 -5
13 1.00 -1
14 0.97 -3
15 0.91 -6
16 0.89 -2
17 0.88 -1
20 0.91 +3
21 0.88 -3
22 0.87 -1
23 0.80 -7
24 0.74 -6
27 0.74 0
28 0.79 +5
29 0.76 -3
30 0.78 +2
31 0.76 -2
  Table 1: Daily 15-year gilt yields and changes
* bp - basis points

News related stories:
Gilt yields rise as US-China trade deal could boost global growth
Yields recover after US considers limited trade deal with China
Gilt yields reduce to record lows as investors seek safe havens
Gilt yields fall to lowest level this year after US Fed cuts rates
Gilt yields rise as Trump delays tariff on $200bn China trade
Annuity Rates
  Age Single Joint  
  55 £3,947 £3,702  
  60 £4,391 £4,052  
  65 £5,098 £4,638  
  70 £6,055 £5,457  
£100,000 purchase, level rates, standard
Unisex rates and joint life basis
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