The fall in the value of gilts should see an increase in pension annuity rates, according to industry experts.
The initial reaction of the gilt market was unchanged due to the gilt issuance forecast remaining unchanged. However, there was no clear indication yet of how the state would cut public borrowing, currently running at £178 billion in 2009. This meant that investors were still unsure about the UKs AAA credit rating. They fear that, if the government does not take drastic steps to reduce the deficit, the state will be charged more to borrow money and thus reduce it’s credit rating.
But for annuitants this is good news as a fall in the price of gilts means and increase in the yield. 10 year gilt yields have gone up by 8.1 per cent in the last fortnight alone. Hargreaves Lansdown pension guru Nigel Callaghan described gilt prices as having “fallen through the floor” and that this was “good news” for annuitants looking to get favourable rates.
But this surge in rates could be short lived, as rates are very volatile at the moment.
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