Annuity Rates, Annuities, Pensions, Divorce Annuity Rates Charts
Home News Annuity Rates Annuities Pension Annuity Impaired Annuity Annuity Quotes Pensions Divorce Resources

5 October 2013 last updated
Annuity rates threat as gilt yields collapse following US debt crisis
15-year gilt yields chart
Based on figures for September 2013
15-year gilt yields September 2013

Annuity rates are under threat after the 15-year gilt yields collapse 29 basis points during the month following the Federal Reserve delay to tapering the stimulus package and the US debt ceiling crisis.

Standard rates:  
annuity rates up 2.28%
Enhanced rates:  
annuity rates down 0.36%
Gilt yields:  
annuity rates down 7 basis points

Gilt yields have suffered from the financial and political policies in the US and this is having a direct impact on annuity rates for people returning in the UK.

  More annuity topics
  October News 2013
  News & articles
  Archive news stories
  Flexi-access drawdown
  Annuity rates tables
  Outlook for 2019
  Annuity rates charts
  15-year gilt yields
  Latest annuity rates
Standard annuity rates ready for a fall

15-year gilt yields increased 23 basis points to 3.38% during the month. As a general rule a 23 basis point rise would see annuity rates increase by 2.3% and standard annuity providers followed quickly with increases of 2.28% matching yields. Yields have ended the month down by 7 basis points on last month.

The rise in yields has been in part due to the market expectation that the US Federal Reserve was about to taper the $85 billion a month stimulus package and when this was delayed investors started to reverse earlier actions, sending yields lower. This was coupled with the impending deadline of the US Government reaching their $16.7 trillion debt ceiling and running out of money on 17 October sending investors to safe havens such as US Treasury notes and UK government bonds and gilts.

The fall of yields to 3.09% means standard annuity providers will have to reduce their annuity rates at least in the short term. The enhanced and smoker annuity providers have already decreased rates by 0.36%. In the short term, one month, we would expect standard rates to decrease by 2.98% on average with lifestyle enhanced and smoker annuities decreasing by 0.34% on average.

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 increase   59%
annuity rates no change   7%
annuity rates decrease   34%
Increases of:
0.1% - 3.8%

  Decreases of:
  Fig 1: Annuity rate changes for the whole market

Only 59% of annuities increased for mainly from standard annuity providers with improvements of between 0.1% to 3.8%. The biggest gains were for those aged 65 and over with smaller gains for those aged 55 to 65 and no rates were lower for standard rates.

Enhanced and smoker rates were mainly lower with all the decreases from this category and in particular for those aged 55 to 60. One exception was 100% joint life aged 70 or under where annuity rates increased.

Equity markets started at 6,413 and increased 49 points to end at 6,462. This represents a 0.7% increase and for people that remain invested have seen their fund rise in value slightly which would complement the rise in pension annuity rates.

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

All standard annuities increased following the rise in yields and by the end of the month where considerably higher compared to gilts indicating a correction will happen shortly.

What happened to enhanced rates

Lifestyle smoker and enhanced annuities have decreased in line with the fall in gilt yields as is customary with providers of impaired annuities. In the short term it is likely that annuity rates will decrease slightly especially if yields drift back down as can be seen in the following chart.

Enhanced annuity 1 month changes
Fig 3: Change in enhanced rates last month compared to gilt yields

For smoker and enhanced annuity rates on the 100% joint life, level basis annuities remain higher at the end of the month although last month these rates lagged behind the increase in yields.

The impaired providers such as Just Retirement, Liverpool Victoria and Partnership have decreased their annuity rates following the yields closely. See Annuity Rates Review For the latest updates. Changes in gilt yields

Changes to the 15-year gilt yields

Gilt yields continued to rise following the announcement from the US Federal Reserve that they were going to taper the $85 billion a month stimulus package. The Governor of the Bank of England Mark Carney "forward guidance" policy to keep interest rates at 0.5% was challenged by markets by selling gilts thereby decreasing prices and increasing yields.

As a result yields increased to the highest point in two years at 3.38% before a turnaround by the Federal Reserve not to embark on tapering just yet send yields lower. The US debt ceiling further worried markets with the brinkmanship between the Government and Republican run House of Representatives. The 15-year gilt yields have reduced to 3.09% as investors seek safer havens in times of uncertainty.

For September the yields range for the month was from 3.15% to 3.38% or 23 basis points which is less volatile than previous months more damaging for standard annuity providers as they are now exposed to a fall. 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 - September 2013
Mon 2nd Tues 3rd Wed 4th Thurs 5th Fri 6th
gilt yields up   0.05
gilt yields up   0.03
gilt yields down   0.01
gilt yields up   0.12
gilt yields down   0.07
Mon 9th Tues 10th Wed 11th Thurs 12th Fri 13th
gilt yields up   0.02
gilt yields up   0.08
gilt yields down   0.01
gilt yields down   0.06
gilt yields down   0.02
Mon 16th Tues 17th Wed 18th Thurs 19th Fri 20th
gilt yields down   0.03
gilt yields up   0.05
gilt yields up   0.04
gilt yields down   0.08
gilt yields up   0.03
Mon 23th Tues 24th Wed 25th Thurs 26th Fri 27th
gilt yields down   0.03
gilt yields down   0.08
gilt yields down   0.05
gilt yields down   0.01
gilt yields down   0.05
Mon 30th        
gilt yields down   0.01
  Fig 4: Daily 15-year gilt yields and changes

News related stories:
UK annuity threat as yields fall with looming US debt ceiling
UK annuities boost as Fed plan to taper QE to start from September
Annuity rates edge higher as Fed plans to taper QE
Retirement annuities threat as yields fall on UK and US stimulus plans

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
  Annuity Rates  
Annuity Quotes
  Plan your annuity and get quotes from the 12 leading providers  
  free annuity quote Free Annuity Quotes
  annuity quote no obligation No Obligation
  annuity quote all providers From All Providers
  Annuity Quote  
  Annuity Rates News:

Gilt yields rise with US-China trade deal
Gilt yields rise with US-China trade deal

15-year gilt yields rise 14 basis points with annuity rates up for the second month

Providers increase annuity rates by 5%
Providers increase annuity rates Standard annuities rise over 5% with gilt yields recovering from all time lows
Cash annuity offer 14% more income
Purchased life annuity better value Purchased life annuities offer 14% more income than pension annuity
Impaired annuities rise with higher yields
Impaired annuities up 1.5% Impaired annuity rates from providers rise 1.5% with prospect of Brexit deal
Gilt yields rise and Trump delays tariff
Yields recover from all time low

Yields recover from a low as Donald Trump considers limited trade deal with China

  Follow Us:
You can follow the latest annuity updates on Twitter or as a fan on Facebook
  Facebook Page Twitter Page   This website is for marketing purposes only and does not provide specific financial or legal advice. Website security issued by GeoTrust and Equifax. Copyright©2001-20 All Rights Reserved