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4 November 2022 last updated

Gilt yields reach fourteen year high of 5.09pc with record annuity rates

Gilt yields reach fourteen year high
 
Standard rates:  
annuity rates change 3.68%
Enhanced rates:  
annuity rates change 0.36%
Gilt yields:  
annuity rates change 37 basis point
 
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15-year gilt yields chart - Based on figures for October 2022
Latest gilt yield chart

Annuity Rates UK - October 2022 review

Providers have increased annuity rates by 47% on average during 2022 with half of this rise due to the Mini Budget. Annuities are at a fourteen year high and for for certain ages and features annuity rates are up as much as 90% for the year.

Find related news here:
Pension annuities up 47pc this year with extra help from Mini Budget
Annuity rates increase 15pc as Mini Budget sends yields to record levels

The 15-year gilt yields reached 5.09% on 12 October 2022 or up 395 basis points since the start of the year. Since the appointment of Rishi Sunak as Prime Minister the 15-year gilt yields reduced to 3.87% or up 273 basis points this year.

Providers have raised annuities by 47% whereas gilt yields over the same period are higher by 27% this year. This suggests providers are pricing in further increases in gilt yields in the next six months due to central bank's raising base rates. Therefore annuity rates may remain at the current level, fall or rise slightly until further progress is made by the 15-year gilt yields.

Providers of standard annuities increased annuity rates by an average of 3.68% for this month and we would expect rates to fall by -4.68% in the medium term if yields remain at current levels.

For smoker and enhanced annuity providers have decreased their rates by an average of -0.36% and we would expect rates to rise by 0.86% 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   68%
annuity rates no change   0%
annuity rates decrease   32%
Increases of:
max 11.0%

 

Decreases of:
max -4.8%

  Fig 1: Annuity rate changes for the whole market


For the month 68% of annuity rates increased by up to 11.0% with 0% remaining unchanged and 32% decreasing by as much as to -4.8%.

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 4.24% to 3.87% or -37 basis points. 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 - October 2022
Day Rate (%) Change (bp*)
3 4.21 -3
4 4.19 -2
5 4.31 +12
6 4.48 +17
7 4.60 +12
10 4.84 +24
11 4.84 0
12 4.81 -3
13 4.56 -25
14 4.80 +24
17 4.39 -41
18 4.33 -6
19 4.19 -14
20 4.22 +3
21 4.33 +11
24 4.02 -31
25 3.96 -6
26 3.94 -2
27 3.74 -20
28 3.85 +11
31 3.87 +2
  Table 1: Daily 15-year gilt yields and changes
* bp - basis points
News related stories:
Annuity rates rise by record 7pc last month as gilt yields weaken
Gilt yields fall 33 basis points off peak due to investor recession fears
Annuity Rates
  Age Single Joint  
  55 £6,132 £5,784  
  60 £6,532 £6,234  
  65 £7,247 £6,808  
  70 £8,170 £7,616  
£100,000 purchase, level rates, standard
Unisex rates and joint life basis
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