Gilt yields rise to record level for 2024 as interest rates stay higher for longer

15-year gilt yields chart - Based on figures for February 2024

Annuity Rates UK - February 2024 review

Interest rates are expected to remain higher for longer as inflation is not reducing quickly as expected, sending 15-year gilt yields to a record level in 2024 of 4.54% on 26 February.

Gilt yields ended February at 4.45% and have increased 50 basis this year with annuity rates rising an average of 4.62% during the month.

In the US consumer price index (CPI) inflation decreased from 3.4% to 3.1% although core CPI that excludes food and energy remained the same at 3.9%.

In the UK CPI inflation in January 2024 was unchanged at 4.0% and the Bank of England does not expect to reduced interest rates until the second half of the year.

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Providers of standard annuities increased annuity rates by an average of +4.62% for this month and we would expect rates to decrease by -2.22% in the short term if yields remain at current levels.

For smoker and enhanced annuity providers have increased their rates by an average of +1.50% and we would expect rates to increase by +0.90% 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   100%   0%   0% Increases of: max 7.1%   Decreases of: max 0.0 %

Fig 1: Annuity rate changes for the whole market

Fig 2: Change in standard rates last month compared to gilt yields

Fig 3: Change in enhanced rates last month compared to gilt yields