Pensions - Articles - Annuity rates hit highest level in more than a decade


Rates have risen by 35% over the past year. Someone aged 65 with a £100,000 pension can now get an annuity income of £6,637 per year (single life, level, five year guarantee). Last September you would only receive around £4,900 per year. The last time they were this high was March 2010 when a 65-year old male could get £6,678. Annuity rates are determined by long-term gilt yields which are affected by many factors - including interest rates. Annuity rates had been in decline since the Global Financial Crisis and hit an all-time low in the aftermath of the Brexit vote.

 Helen Morrissey, Senior Pensions and Retirement Analyst at Hargreaves Lansdown: "Annuity rates continue to soar – increasing by 35% this year alone – reaching a level not seen for more than a decade. If we see a further interest rate rise today, then we could see these rates rise still further in the coming weeks.

 "Annuities once ruled the roost in retirement income but the low rates on offer meant they faced criticism that they offered poor value for money. The introduction of Freedom and Choice, which gave people much more flexibility over how they took their pension, saw their use decline hugely. These rising rates could encourage people who wouldn’t have thought of purchasing an annuity this time last year to give them serious consideration.

 "Many people will have a need for some level of guaranteed income during retirement and so annuities should always form a part of any retirement income conversation. Once an annuity is bought it cannot be unwound and this can concern would-be annuitants who don’t want to lock into a rate that then subsequently rises. However, you are under no obligation to annuitise your pension in one go. A good approach could be to annuitise in stages, securing income to meet your needs as you need it. This gives you the opportunity to secure higher rates as you age, and you may also qualify for a further boost to your income through an enhanced annuity if you develop a medical condition at a later point. It also gives you the chance to keep the remainder of your pension invested for longer where it can hopefully benefit from investment growth."

Back to Index


Similar News to this Story

94 percent view State Pension as an entitlement not benefit
Majority of adults aged 66+ say that Triple Lock is affordable and fair to older generations. Around one in seven rely on the State Pension to provide
Fair play off the pitch
Male players in the English Premier League earn an average of more than £3 million per year, while their female counterparts average around £47,000. T
Why Bitcoin matters to Pension Schemes
Back in November 2024, Cartwright Pension Trusts announced its role in facilitating the first-ever UK DB pension trust investment in Bitcoin. With the

Site Search

Exact   Any  

Latest Actuarial Jobs

Actuarial Login

Email
Password
 Jobseeker    Client
Reminder Logon

APA Sponsors

Actuarial Jobs & News Feeds

Jobs RSS News RSS

WikiActuary

Be the first to contribute to our definitive actuarial reference forum. Built by actuaries for actuaries.