Gilt Yields could Push Annuity Rates Lower

Investors planning to buy an annuity are urged not to delay, as Brexit market turbulence is likely to push rates still lower

Emma Simon 24 June, 2016 | 4:02PM
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Annuities look set to plunge further, after increased demand for gilts has pushed yields to record low.

Gilts – sovereign debt issued by the government – are traditionally seen as a safe haven asset in times of market turbulence. Although the markets have made a modest recovery this afternoon, an 8% fall in the FTSE100 in early trading has led to increased demand for these fixed income assets. This pushed up priced of 10-year and 15-year gilts - as these investments pay a fixed income this further depressed the yield.

Tom McPhail, a leading pension expert with Hargreaves Lansdown said this fall is likely to mean a further dent in annuity rates. Insurers use gilts to fund these long-term savings products, which pay a guaranteed income for life.

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About Author

Emma Simon

Emma Simon  is a financial journalist, specialising in investment and consumer issues, writing for Morningstar.co.uk