Pension Income: Why Gilt Yields Won't Rise

Gilts determine all important annuity rates - meaning investors approaching retirement are willing them to rise. But one fund manager says its a lost hope

David Brenchley 24 November, 2017 | 4:43PM
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Think gilt yields are unusually low? Guess again; a chart of long term government bond yields shows payouts can, and do, stay low for long periods of time. In fact, the "new norm" of record low gilt yields is simply a return to form for government bonds.

The outlying observation is not where gilt yields are today, but where they were 30 years ago.

During the Sixties, gilt yields averaged around 6%, whil in the Seventies they hit as high as 12%. Even in the Nineties, annuity investors had the benefit of a base rate of around 5%. But now, gilt yields are less than 2% - and Stephen Snowden, head of fixed income at Kames Capital, says the current measly return is likely to continue for the foreseeable future.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Rating
Aegon Investment Grade Bond GBP A Acc  

About Author

David Brenchley

David Brenchley  is a Reporter for Morningstar.co.uk

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