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5 October 2020 last updated

Fear of new Covid-19 restrictions in Europe sends gilt yields lower

Gilt yields fall on Covid-19 fears
Standard rates:  
annuity rates change 0.34%
Enhanced rates:  
annuity rates change 0.19%
Gilt yields:  
annuity rates change 11 basis point
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15-year gilt yields chart - Based on figures for September 2020
Latest gilt yield chart

September 2020 Review

Investors fear increasing cases of Covid-19 in Europe will result in further lockdown restrictions being implemented and impacting the economy with 15-year gilt yields 11 basis points lower.

Find related news here:
Retirement annuities rise up to 2.4pc as investors sell-off bonds and gilts
Gilt yields lower with concern of global economy as Covid-19 cases rise
Annuity rates risk falling as rise in Covid-19 cases slows recovery

The 15-year gilt yields decease by 11 basis points to 0.45% during September as investors fear the rise in Covid-19 cases in Europe could see further lockdowns.

Providers of standard annuities reduced annuity rates by an average of 0.34% for this month and we would expect rates to fall by -0.76% in the short term if yields remain at current levels.

For smoker and enhanced annuity providers have reduced their rates by an average of -0.19% and rates and we would expect rates to fall by -0.91% 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   6%
annuity rates no change   14%
annuity rates decrease   80%
Increases of:
max 2.8%


Decreases of:
max -1.6%

  Fig 1: Annuity rate changes for the whole market

For the month 6% of annuity rates increased by up to 2.8% with 14% remaining unchanged and 80% decreasing by as much as to -1.6%.

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 0.56% to 0.45% or 11 basis point. Table 1 below shows the daily 15-year gilt yields and the increase or decrease from the previous day's close:

15-Year Gilt Yields - September 2020
Day Rate (%) Change (bp*)
1 0.55 -1
2 0.48 -7
3 0.48 0
4 0.51 +3
7 0.49 -2
8 0.42 -7
9 0.47 +5
10 0.47 0
11 0.42 -5
14 0.43 +1
15 0.45 +2
16 0.44 -1
17 0.42 -2
18 0.42 0
21 0.39 -1
22 0.43 +4
23 0.44 +1
24 0.44 0
25 0.41 -3
28 0.42 +1
29 0.41 -1
30 0.45 +4
  Table 1: Daily 15-year gilt yields and changes
* bp - basis points

News related stories:
Providers raise annuity rates as gilt yields bounce 22 basis points
Pension annuities fall as Federal Reserve hold rates until 2022
Equity markets rally on hopes for vaccine as yields lack direction
Annuity Rates
  Age Single Joint  
  55 £3,851 £3,569  
  60 £4,268 £3,973  
  65 £4,965 £4,581  
  70 £5,831 £5,274  
£100,000 purchase, level rates, standard
Unisex rates and joint life basis
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