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10 March 2020 last updated

Gilt yields fall as coronavirus threatens slowdown for global growth

Gilt yields fall with threat to global growth
 
Standard rates:  
annuity rates change 0.60%
Enhanced rates:  
annuity rates change 1.14%
Gilt yields:  
annuity rates change 10 basis point
 
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15-year gilt yields chart - Based on figures for February 2020
Latest gilt yield chart

February 2020 Review

Providers of standard annuities reduced rates by -0.60% for February with 15-year gilt yields reducing 10 basis points and is now 41 basis points lower since the start of the year.

Investors are concerned with the potential slowdown in global growth caused by the spread of the coronavirus with funds heading for the safety of gilts and bonds.

Find related news here:
Pension annuities risk as oil price fall sends yields to all time lows
Retirement income at decade low with panic selling on equity markets

There is an increasing threat to trade and corporate earnings from coronavirus as the number of cases exceeds 100,000 and countries outside China such as South Korea, Iran and Italy establish quarantine measures to control the spread of the virus.

The 15-year gilt yield are lower by 10 basis points to 0.66% during February 2020 and approaching to the all time low reached in September 2019 of 0.566% following uncertainty of the UK leaving the EU without a deal.

Providers of standard annuities reduced annuity rates by an average of -0.60% for this month and we would expect rates to reduce by -0.50% in the short term if yields remain at current levels.

For smoker and enhanced annuity providers have increased their rates by an average of 1.14% and rates and we would expect rates to decrease -2.24% 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   48%
annuity rates no change   22%
annuity rates decrease   30%
Increases of:
max 3.4%

 

Decreases of:
max -6.8%

  Fig 1: Annuity rate changes for the whole market


For the month 48% of annuity rates increased by up to 3.4% with 22% remaining unchanged and 30% decreasing by as much as to -6.8%.

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 0.76% to 0.66% or 10 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 - February 2020
Day Rate (%) Change (bp*)
3 0.76 0
4 0.81 +5
5 0.86 +5
6 0.83 -3
7 0.81 -2
10 0.81 0
11 0.80 -1
12 0.80 0
13 0.83 +3
14 0.87 +4
17 0.87 0
18 0.84 -3
19 0.82 -2
20 0.80 -2
21 0.77 -3
24 0.74 -3
25 0.71 -3
26 0.70 -1
27 0.68 -2
28 0.66 -2
  Table 1: Daily 15-year gilt yields and changes
* bp - basis points

News related stories:
Pension annuities risk as oil price fall sends yields to all time lows
Investors seek safety of gilts as global health emergency declared
Annuity rates lower as demand for safe havens rise on coronavirus fears
Gilt yields rise as US-China trade deal could boost global growth
Yields recover after US considers limited trade deal with China
Annuity Rates
  Age Single Joint  
  55 £3,723 £3,370  
  60 £4,192 £3,911  
  65 £4,920 £4,378  
  70 £5,769 £5,246  
£100,000 purchase, level rates, standard
Unisex rates and joint life basis
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