The benchmark average for what is considered a ‘healthy’ annuity rate for someone age 65 has almost reached 6 per cent, according to Canada Life.
According to the research, recent positive rate movements have resulted in the highest annuity rates recorded since 2014. The increase in rates follows a rise in reference gilt yields and market competition.
This is for a single-life annuity with a guarantee period of 10 years which would pay out £5,800 a year in income. For someone age 70 the reference income would be £6,368 or 6.37 per cent.
For someone aged 65 with a £100,000 pension, they could buy an RPI-linked annuity of £3201 p.a, according to Canada Life.
Canada Life retirement income director Nick Flynn says: “The positive movement in rates over the last four months in one of the most significant I’ve witnessed, with a 30 per cent uplift in Canada Life rates since the turn of the year. The trigger has been the moves in base rate while the open market annuity providers have also been seeking market share by offering better rates.
“The outlook for annuity rates will continue to remain positive while fiscal policy unwinds quantitative easing and the Bank of England grapples with inflation. The most recent base rate moves have been priced into the rates you can buy today, but it will always be wise to shop around for your annuity, as not only will you secure the best lifetime income in the open market, but you will also buy the right shape.
“Buying an annuity is a significant financial step and an adviser or annuity broker will be best placed to help understand the choices available.”
Flynn adds: “As with any financial decision, take your time to consider your options and seek advice. With a significant improvement in rates over the past few months, annuities should be worth a second look. With the right shape and best rate not only will you guarantee a lifetime of income, but you can also protect your loved ones.”
